Judge Travis A. (“Tag”) Greaves has to deal with the Section 41 Qualified Research Expenses of J.G. Boswell Company and Subsidiaries, Docket No. 2408-19, filed 7/12/22. Are they expenses to produce more cotton or safflower, better cotton or safflower, or just cotton and safflower (in which case they don’t qualify at all)?

“Section 41(d)(2)(C) distinguishes between research designed to improve a taxpayer’s commercial product, on the one hand, and research that seeks a better process for producing the taxpayer’s existing product, on the other. Respondent argues that petitioner engaged in only the latter kind of research, testing new ways of growing the same crops.” Order, at p. 1. Therefore, says IRS, any expenses that JG would incur just to grow the stuff anyway is not QRE.

Judge Tag Greaves says OK, but the record doesn’t show that product improvement wasn’t on the JG menu. But the cost of just producing product to show the method didn’t degrade quality isn’t research at all, must less Qualified Research.

But more facts are needed, and neither side can get summary J on this record.

“If petitioner demonstrates that its tests of the viability of improved crops are section 41(d) qualified research, therefore, the trial crops it produced were experimental models, and the associated costs are QREs to the extent permitted by section 41(b). Respondent cannot defeat any such argument simply by demonstrating that petitioner would have incurred the expenditures had it used its standard production processes on the research acres.” Order, at p. 8.

Nevertheless, here the summary J motions fulfilled very useful purposes. It permitted discovery of JG’s case, IRS’ case, and, most importantly, Judge Tag Greaves’ view of the case.

“We deny both Motions so we may determine (1) which of petitioner’s 55 research trials sought to improve petitioner’s production process alone, as opposed to one of its products, (2) which disallowed QREs associated with these research trials petitioner would not have incurred had it cultivated the research acres as production acres, and (3) the amount of QREs incurred in the remaining research trials.” Order, at p. 8.