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the estate or trust should enter its share

research performed on your behalf.

account for the year for such expenses

of the credit. Label it “1041 PORTION”

Prepaid contract research expenses are

by the amount of the excess.

and use this amount in Part II to figure

considered paid in the year the research

Attach a schedule to your tax return

the credit to take on Form 1041. On

is actually done. Also include 65% (.65)

that lists the deduction amounts (or

Schedule K-1, show each beneficiary’s

of that portion of the line 11 basic

capitalized expenses) that were reduced.

share of the portion allocated to

research payments that does not exceed

Identify the lines of your return (schedule

beneficiaries.

the line 12 base amount. See section

or forms for capitalized items) on which

41(e)(1)(B).

S corporations and partnerships.—

the reductions were made.

Allocate the orphan drug credit on line 4

Line 19.—Compute the fixed-based

Line 27.—Enter the amount of credit

among the shareholders or partners.

percentage as follows:

that was allocated to you as a

Attach Form 6765 to the return and on

Existing firms.—The fixed-base

shareholder, partner, or beneficiary.

Schedule K-1 show the credit for each

percentage is the ratio that the

Line 28—Estates and trusts.—Allocate

shareholder or partner.

aggregate qualified research expenses

the research credit on line 28 between

for at least 3 tax years from 1984 to

the estate or trust and the beneficiaries

Part II—Tax Liability

1988 bear to the aggregate gross

in the same proportion as income was

receipts for such tax years. Round off

Limitation for the Orphan

allocated. On the dotted line to the left

the percentage to the nearest 1/100th of

of the amount on line 28, the estate or

Drug and Research Credits

1% (i.e., four decimal places).

trust should enter its share of the credit.

Line 8.—Enter the tentative minimum

Startup companies.—If there are

Label it “1041 PORTION” and use this

tax (TMT) that was figured on the

fewer than 3 tax years beginning after

amount in Part IV (or on Form 3800, if

appropriate alternative minimum tax

December 31, 1983, and before January

required) to figure the credit to take on

(AMT) form or schedule. Although you

1, 1989, in which you had both gross

Form 1041. On Schedule K-1, show

may not owe AMT, you still must

receipts and qualified research

each beneficiary’s share of the portion

compute the TMT to figure your credit.

expenses, the percentage is 3%. If the

allocated to beneficiaries.

percentage computation involves de

Line 10.—Include the orphan drug credit

S corporations and partnerships.—

minimis amounts of gross receipts and

on the appropriate line of your 1993 tax

Allocate the research credit on line 28

qualified expenses in a tax year or short

return. If it is not listed separately on the

among the shareholders or partners.

tax years are involved, see sections

return, include the credit on the “other

Attach Form 6765 to the return and on

41(c)(3) and 41(f)(4).

credits” or “total credits” line; then write

Schedule K-1 show the credit for each

“ORPHAN DRUG CREDIT” and the

Note: The maximum percentage allowed

shareholder or partner.

amount on the dotted line to the left of

on line 19 is 16%.

the entry amount.

Part IV—Tax Liability

Line 20.—Enter the average annual

gross receipts for the 4 tax years

Limitation for the Research

Part III—Current Year Credit

preceding the tax year for which the

Credit

credit is being determined (called the

for Increasing Research

credit year). You may be required to

Line 31.—See section 38(c)(3) for

Activities

annualize gross receipts for any short

special rules for married couples filing

tax year. See sections 41(c)(1)(B) and

Line 11.—Corporations (other than S

separate returns, for controlled corporate

corporations, personal holding

41(f)(4) for details.

groups, and for estates and trusts.

companies, and service organizations)

For lines 19 and 20, reduce gross

Line 34.—If you are an individual,

may be eligible for a “basic research”

receipts for any tax year by returns and

estate, or trust, the credit(s) on line 26 or

credit if your 1993 payments in cash to

allowances made during the tax year.

27 is limited to the amount attributable

a qualified university or scientific

For a foreign corporation, include only

to your interest in the proprietorship,

research organization (under a written

gross receipts that are effectively

partnership, S corporation, estate, or

contract) exceed a base period amount

connected with the trade or business

trust generating the credit. Figure the

(based on your general university giving

within the United States.

credit separately for each business

and certain other maintenance-of-effort

enterprise by using the following

Line 23.—The base amount cannot be

levels for the 3 preceding years). Enter

formula:

less than 50% (.50) of the current year

your 1993 payments on line 11. See

qualified research expenses. This rule

Taxable income attributable

section 41(e) for details.

applies to existing and newly organized

to your interest in the

Line 12.—Enter the base period amount

unincorporated business,

businesses.

1065, 1041, or 1120S entity

as defined in section 41(e). The amount

Line 26.—If you do not elect the

(Line 30 – Line 31)

on line 12 (but not more than the

reduced credit, you must reduce your

Taxable income for the year

amount on line 11), although not eligible

(Form 1040, line 37)

otherwise allowable deduction for

for the 1993 basic research credit, can

qualified research expenses or basic

The credit is limited to 100% of line 30

be treated as 1993 contract research

research expenses by the amount of the

minus line 31.

expenses on line 17 (and subject to the

credit on line 26. If the line 26 credit

If in the current tax year you had no

65% (.65) limitation).

exceeds the amount allowed as a

taxable income attributable to a

Line 16.—See section 41(b)(2)(A) for

deduction for the tax year, reduce the

particular business interest, you cannot

rules on leased property if you receive

amount chargeable to the capital

claim any research credit this year for

payments from anyone for the rental or

that business.

lease of substantially identical property.

Line 17.—Include 65% (.65) of any

amount paid or incurred for qualified

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Instructions For Form 6765 - Credit For Increasing Research Activities (Or For Claiming The Orphan Drug Credit) - 1993 Page 2

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