Basim Shami and Rania Ardah v. Commissioner (2014)

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Main Issue:

  • Above first-line management qualification of time
  • Oral testimony


  • Company was confirmed to have been performing R&D prior to 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


  • Taxpayer failed to provide support for R&D activities of President and EVP
  • Oral testimony deemed self serving and was not corroborated by other employees
  • Could not apply “Cohan rule” since no reasonable basis on which to estimate the R&D

Take-Away Point:

  • If higher level people performing R&D, taxpayer must be able to prove R&D involvement through credible oral testimony and research activity documentation

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