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Sec. 1.174-1 Research and experimental expenditures; in general.

Section 174 provides two methods for treating research or experimental expenditures paid or incurred by the taxpayer in connection with his trade or business. These expenditures may be treated as expenses not chargeable to capital account and deducted in the year in which they are paid or incurred (see section 1.174-3), or they may be deferred and amortized (see section 1.174-4). Research or experimental expenditures which are neither treated as expenses nor deferred and amortized under section 174 must be charged to capital account. The expenditures to which section 174 applies may relate either to a general research program or to a particular project. See section 1.174-2 for the definition of research and experimental expenditures. The term "paid or incurred", as used in section 174 and in sections 1.174-1 to 1.174-4, inclusive, is to be construed according to the method of accounting used by the taxpayer in computing taxable income. See section 7701(a)(25).

[Adopted by T.D. 6255, 22 FR 7901, Oct. 4, 1957; republished by T.D. 6500, 25 FR 11402, Nov. 26, 1960.]

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