Hello:
I own a S Corporation in California with my wife and I as the only employees in it currently (before last year we had one more employee, non-related, hired through a local college to help with running some heat/endurance tests on our prototype model). Over the past 2 years we have designed a couple of systems (medical devices) to aid surgeons during two specific surgeries. Our S corp had some revenue for the first 4 months of last year doing R&D work for a medical devices company (completely different type of work than our own product). We paid ourselves throughout the year while we continued our own research & experimentation to improve our product which we are hoping to start selling after July this year (we had done a preliminary demo in front of prospective buyer and it went very successful). Here are my questions:
- Does our situation qualify for Section 174 R&E deductions? If so, are the wages we paid ourselves deductible? I'm referring to only the wages we paid ourselves for our own R&E project, we have kept details of hours/records separately)
- We have reported total wages we paid to ourselves last year on line 8 of
- If we qualify for Section 174 deductions, does anything get reported on Schedule K-1?
- If we qualify for Section 174 deductions, do we also qualify IN ADDITION to get "Research & Experimentation Credit" per Code 41? (We've had gradually increasing R&D each year for the past 4 years, all documented including details of each project - some have turned into products and already made money)
- I don't think we qualify for this but... are we also qualified for Section
Thank you for any response, have a great weekend!
-Desi