Discussion:Website development and 6765
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Discussion Forum Index --> Basic Tax Questions --> Website development and 6765
Discussion Forum Index --> Tax Questions --> Website development and 6765
| 30 January 2008 | |
| Can you take a research credit on form 6765 for hiring software engineers to add new features to your website. In this case the website is a membership site that is the sole source of income.
additionally where would you list research and development costs on 1065? Other Expenses? | |
PostingFromWork (talk|edits) said: | 30 January 2008 |
| §41(d)(4)(E)♫ | |
| 30 January 2008 | |
| So since this is an external website customer/product focused this would be a yes that i could deduct it.
Does it matter that the research was done by a company outside of the US. | |
Taxstudent (talk|edits) said: | 30 January 2008 |
| PostingFromWork is probably right, but the OP did not give enough facts to say that (E) applies. (A) is also a possibility, but I'd be more worried about section 41(d)(1)(A). New proposed regs on internal use software are expected very soon, so you might want to wait on making any decisions. | |
Taxstudent (talk|edits) said: | 30 January 2008 |
| Overlap in posts. External website means very little currently, but the rumored content of the proposed regs should ease up that requirement. If the research is foreign, it rules it out completely. | |
| 30 January 2008 | |
| E would be a dissalowance for internal use , Right?
I am saying this is a external website. It is customer focused login. Where does it say that foreign researchers are not applicable? | |
Taxstudent (talk|edits) said: | 30 January 2008 |
| A customer-focused login and an external website is not especially determinative under the proposed reliance regs, though I've heard that will change under soon-to-be issued proposed reliance regs. IIRC, United Stationers involved the equivalent of an external website with a login and the taxpayer lost, so using the common law may not be very helpful. It all depends on the type of website.
(F) is the disallowance for foreign research for the credit. | |
| 30 January 2008 | |
| thank you for your help.
I cannot believe i didn't see that. | |
| 30 January 2008 | |
| Turns out i was misinformed. Payments were going to a US company.
The website is an adult membership site So I still believe that this would qualify for the credit. Any other thoughts? | |
Taxstudent (talk|edits) said: | 30 January 2008 |
| Under the existing proposed reliance regs, it probably would be considered internal use software because the business components, the features, are probably not being marketed for separately stated consideration. (Don't those sites usually use a flat, monthly subscription fee?) It might fall under the computer services exception, though that is a very tough question depending on the nature of the site and its services and their relationship with the customers. More likely, you'd have problems under the contract rules. Unless the contract with the developer places the economic burden of the research on the taxpayer, instead of paying the developer for a mere service (the developed features), you'd probably be out of luck. And that's assuming it meets the other requirements of section 41(d). | |
| 30 January 2008 | |
| taxpayer paid for hours of development work. So he did not purchase a product from them, he paid them to develop a new feature to the website. The new features are marketed separately and i could prove income produced from the enhanced features. | |
Taxstudent (talk|edits) said: | 30 January 2008 |
| That's neat (about the features and the income). Under the contract, if the development efforts failed, would the TP still owe the developer for their hours? If the answer is "yes", then you'd be left with the other normal qualifying tests and possibly some other exclusions. Maybe not. It's not really possible to say without looking at the contract and the actual facts and circumstances. | |
| 30 January 2008 | |
| Yes they would be liable, Since they are paying for development hours. Not an end product. | |
