Question

DURING CALENDAR YEAR 2018, NEW TECHNOLOGY CORPORATION INCURRED QUALIFIED RESEARCH EXPENSES OF 600,000 AND HAS A POTENTIAL research credit of 120,000. THEY DESRE TO DEDUCT THE MAXIMUM ALLOWABLE EXPENSE BY TAKING A REDUCED CREDIT FOR QUALIFIED RESEARCH EXPENSES. THE ALLOWABLE DEDUCTION AND CREDIT WILL BE A --------------- RESEARCH EXPENSES DEDUCTION AND A ------------ TAX CREDIT FOR QUALIFIED RESEARCH EXPENSES. THE CREDIT IS REDUCED BY THE CORPORATE TAX RATE.

300,000 42800

600,000, 78,000

600,000, 94800

600,000 120,000

Answer 1

As per books and law refered by me the correct answer is option D.

The allowable deduction is 600000 and the credit that can be availed by the tax payer is 120000

Explanation for the above given statement.

As per said in the question the research and development expenses of the company is 600000

The credit can be taken to the extent of 20% of the actual amount spent for research and development.

So in the given case we can avail the 20% of the 600000

120000 is eligible credit that can be taken by the company.

These are all the information and calculations required to solve the given question.

I hope, all the above mentioned points and calculations are useful and helpful to you.

Thank you.