The Internal Revenue Service has released final regulations to amend the definition of research and experimental expenditures, providing guidance for taxpayers engaged in research activities on the treatment of amounts paid or incurred in connection with the development of tangible property, including pilot models.

Last September, the IRS and the Treasury Department issued a notice of proposed rulemaking proposing a number of revisions to the current regulations. First, to counter an interpretation that Section 174 eligibility can be reversed by a subsequent event, the proposed regulations provided that the ultimate success, failure, sale or other use of the research or property resulting from research or experimentation is not relevant to a determination of eligibility under Section 174.

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