Individual Comments on Proposed Regs on Research and Experimental Expenses

2. What incident occurs in which the elimination of uncertainty has been met? Commercial Production? Customer acceptance of the product?

3. Example 9 -- Can the IRS/Treasury elaborate whether the $2000 of qualified costs was incurred completing a trial production run to eliminate the uncertainty of the changes that were made on the manufacturing process or was the labor and materials qualified for testing in the laboratory sense the finish product that was produced?

4. Shrink back -- does the substantially all rule under IRC § 41(d)(1)(C) apply to the determination of the amount of materials and labor qualify? -- If yes, is it based on total cost or on the cost of labor or material costs. Example -- taxpayer develops a progressive stamping die. The steel blocks that all of the internal components of the tool are mounted to account for 50% of the material cost, 2% of the labor cost associated with the design and development of the tool is related to the initial machining of the steel blocks and 15% of the total material and labor cost is related to the steel blocks. The remaining 85% of labor and material costs are related to activities that qualify as a 174 cost. Is the material cost related to the steel blocks eligible as a 174 cost under the substantially all test or does the shrink back rule apply separately to the steel blocks?

5. Clarification on supplies -- What is the interpretation of the Service in the following scenario: Company A has been producing a product using an existing manufacturing process. Company A needs to improve the manufacturing process to increase the throughput. Company A engages in qualified research activities to develop a new manufacturing process. During the development of the improved manufacturing process, Company A produces parts to test the performance of the improved manufacturing process. It appears from the examples that the materials related to the parts produced during the development of the improved process qualify as a 174 cost. Is this the correct conclusion?