Main Issue:
Statistical Sampling / Documentation
Facts:
Taxpayer took a center approach to qualification refusing to identify each business component so that a statistical sampling approach could be proposed
The taxpayer proposed a sampling approach (selecting 8 of 49 divisions) of R&D locations, this was denied by the court
Conclusion:
The court rejected the taxpayer's approach and stated that they must identify the business components and then the government will consider a sampling method
Take-Away Point:
Business component identification is critical in defending a credit and companies are more likely to get court support in approaches to sampling if basic documentation standards are met
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