Main Issue:
Above first-line management qualification of time
Oral testimony
Facts:
The company was confirmed to have been performing R&D prior to the litigation
President and Executive Vice-President who were qualified at 80% and compensated in the millions were included as QREs
Executives did not have technical backgrounds
Conclusion:
Taxpayer failed to provide support for the R&D activities of the President and EVP
Oral testimony was deemed self-serving and was not corroborated by other employees
Could not apply the “Cohan rule” since no reasonable basis on which to estimate the R&D
Take-Away Point:
If higher-level people perform R&D, taxpayers must be able to prove R&D involvement through credible oral testimony and research activity documentation.
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