Reg. § 1.280C-3 Disallowance of certain deductions for qualified clinical testing expenses when section 28 credit is allowable.
(a) In general If a taxpayer is entitled to a credit under section for qualified clinical testing expenses (as defined in section ), it must reduce the amount of any deduction for qualified clinical testing expenses paid or incurred in the year the credit is earned by the amount allowable as credit for such expenses (determined without regard to section ).
(b) Capitalization of qualified clinical testing expenses In a case in which qualified clinical testing expenses are capitalized, the amount chargeable to the capital account for a taxable year must be reduced by the excess of the amount of the credit allowable for the taxable year under section (determined without regard to section ) over the amount allowable as a deduction for qualified clinical testing expenses (determined without regard to of this section) for the taxable year. See section and the regulations thereunder.
(c) Controlled group of corporations; organizations under common control In the case of a taxpayer described in (relating to controlled groups of corporations and organizations under common control), and of this section shall be applied in accordance with the rules prescribed for aggregation of expenditures under that paragraph.
(d) Example The following example illustrates the application of and of this section:
Example. A incurs $1,000 in clinical testing expenses for which a $500 credit is allowable under section . A also elects under section 174 of the Code to amortize these expenses over a 5-year period beginning in the year the credit is claimed. Under paragraph (a), the current year amortization deduction of $200 ($1,000 ÷ 5) is disallowed. Moreover, the amount which would otherwise be capitalized, $800, is reduced by the excess of the amount of the section credit claimed for the taxable year over the amount of the allowable section amortization deduction for the taxable year, or $300 ($500-$200). Thus, the amount chargeable to the capital account for the taxable year is $500 ($800-$300). A is entitled to amortize $500 over the remaining amortization period resulting in a deduction of $125 for each of the remaining four years.
[T.D. 8232, 53 FR 38715, Oct. 3, 1988]