Comment by silverlight
3 years ago
To be clear I would love for this to be the case. I'm just curious though how you would justify saying a developer's salary is not a software development expense?
3 years ago
To be clear I would love for this to be the case. I'm just curious though how you would justify saying a developer's salary is not a software development expense?
You need to talk to an actual accountant or tax lawyer. The key verbiage is "for the purposes of this section", and the language which optionally supersedes it in other sections (notably section 162) in combination with several court rulings.
You really can't just read individual sections of the tax code and expect to understand how the thing works as a whole.
I started this discussion after hearing about this from my CPA, who works for a large, multi-state firm.
My other business has a different CPA that I am waiting to hear from in terms of their advice/interpretation of this.
The articles I linked in the OP is from a multi-national CPA firm.
I am basically here hoping someone else has professional advice from a CPA that contradicts what I've been told since I would love for this to be completely not how this is working.
So I just want to make sure, are you saying you heard from your CPA/tax attorney that this is not how this works? Or are you just basing that on your read of it?
I have heard from my tax guy about the 174/162 treatment and "new" cos vs "carrying on trade" cos and his read is that it's defensible to continue using the latter provision especially given one has actual revenue associated directly with that activity as of year 0, rather than some kind of 80s style "we will spend two years building the software and then three selling it in boxes" that is more directly analogous to capitalizable costs. It happens all the time that CPAs are overly focused on particular provisions phasing in and out vs a holistic view of what provisions even apply.
Keep talking to CPAs until you find the one willing to engage in sufficiently aggressive tax treatment to not bankrupt your company. Tax returns are not footnoted; you're not required to explain at time of filing what exact reading of your activity and the tax code leads you to believe you have a vanilla payroll expense vs a capitalized R&D expense.
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