In Uncategorized on 04/15/2019 at 16:43

Siemer Milling Company, 2019 T. C. Memo. 39, filed 4/15/19, heretofore featured in this my blog for its Gargantuan Rule 91(f) proposed stips. But Judge Buch, tiring of such tactics, told Siemer to go try the case.

See my blogpost “Don’t Manipulate, Stipulate,” 12/4/17.

Siemer did, and their Section 41 research expense deductions crater on non-application of “principles of the physical or biological sciences, engineering, or computer science,” because Siemer didn’t show they used any, and on Siemer’s failure to show they formulated or tested hypotheses, or engaged in modeling, simulation, or systematic trial and error. In short, tinkering isn’t research.

IRS argue that Siemer didn’t have business uncertainty in more than one year, but that doesn’t fly. One can be uncertain for years while experimenting.

And Siemer’s lead researcher (the only one who testified) had no engineering or science degree. So what, says Judge Buch. The law doesn’t require an experimenter to have such degrees. And IRS could have called any of Siemer’s employees, so no negative inference that Siemer didn’t call them.

But ultimately all six (count ‘em, six) projects for which Siemer claimed deductions were elaborated by Siemer’s trusty accountants, who had prepared Siemer’s statement and returns for decades. So no chops, but a salutary warning: stretching a good idea too far can be dangerous to your tax health.


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