In a recent case, the U.S. Tax Court found that multiple shareholders in an S corporation weren’t entitled to a flowthrough of the research credit on their personal tax returns. The $501,531 tax credit was claimed by the air pollution control systems business in connection with 19 projects. The court ruled that the research expenses failed to satisfy the tax code requirements and “were not creditable.” The court also held the shareholders were liable for accuracy-related penalties for three tax years. (TC Memo 2023-84)
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