Instructions For Form 6765 - Credit For Increasing Research Activities

Who Must File

Department of the Treasury

An individual, estate, trust, organization

Internal Revenue Service

or corporation claiming a credit for

increasing research activities or for

orphan drug expenses, or any S

Instructions for Form 6765

corporation, partnership, estate, or trust

that allocates the credit(s) to its

shareholders, partners, or beneficiaries

Credit for Increasing Research Activities (or for

should complete this form and attach it

to its income tax return.

claiming the orphan drug credit)

S corporations, partnerships, estates,

(Section references are to the Internal Revenue Code unless otherwise noted. )

and trusts that allocate the credit(s) on

lines 4 and 28 to any shareholder,

partner, or beneficiary must show on the

Items To Note

Research conducted after the

appropriate line of Schedule K-1, or on

beginning of commercial production;

an attachment to Schedule K-1, the

The credit for increasing research

credit allocable for that shareholder,

Research adapting an existing product

activities and the orphan drug credit

partner, or beneficiary.

or process to a particular customer’s

expired June 30, 1992. If the credits are

need;

further extended, the IRS will use the

Special Rules

Duplication of an existing product or

media to notify you.

process;

See section 41(f) for special rules related

If the credits are not extended, use

Surveys or studies;

to:

only amounts paid or incurred by June

30, 1992, in figuring the credits.

1. Controlled groups of corporations

Research relating to certain

internal-use computer software;

and businesses under common control;

If the research credit is not extended

beyond June 30, 1992, the qualified

Research conducted outside the

2. Allocation of the credit by

organization’s base period amount on

United States;

partnerships, estates, and trusts;

line 12 may be adjusted for the 1992 tax

Research in the social sciences, arts,

3. Adjustments if a major portion of a

year (and the 1991 fiscal tax year ending

or humanities; or

business is acquired or disposed of; and

after June 30, 1992) under the short-tax

Research funded by another person

4. Short tax years.

year rules contained in section

(or governmental entity).

For special rules concerning the

1.41-3(d)(1) of the Regulations. You must

If you incur qualified clinical testing

allocation and apportionment of research

also reduce the base amount on line 21.

expenses relating to drugs for certain

and experimental expenditures between

See the instructions for line 21 for

rare diseases, you may elect to claim

U.S. and foreign source income, see

details.

the orphan drug credit on these

sections 861 through 864.

expenses instead of taking the research

If you cannot use the research credit

General Instructions

credit.

because of tax liability limitations, carry

See section 41 for other definitions

it back 3 years, then forward 15 years.

Purpose of Form

and special rules concerning the

Use Form 3800. There are no carryback

or carryover provisions for the orphan

research credit.

Use Form 6765 to figure and claim the

drug credit. However, your minimum tax

Orphan drug credit.—The orphan drug

general business credit for increasing

carryover is increased if your orphan

credit is an elective tax credit available

the research activities of a trade or

drug credit is limited by the tentative

for 50% (.50) of qualified clinical testing

business and to claim the orphan drug

minimum tax.

expenses of low-profit or unprofitable

credit. Complete Parts II, III, and IV (or

drugs for rare diseases and conditions,

Form 3800, if required) to figure the

Specific Instructions

as designated under Section 526 of the

research credit. Complete Parts I and II

Federal Food, Drug, and Cosmetic Act,

to figure the orphan drug credit.

paid or incurred during the tax year. For

Part I—Current Year Orphan

additional information, see Regulations

Definitions

Drug Credit

section 1.28-1.

Research credit. The research credit is

The orphan drug credit is similar to

Line 2.—You must reduce the deduction

generally allowed for qualified research.

the credit under section 41 for qualified

for qualified clinical testing expenses

Qualified research is limited to

research expenditures, except that

otherwise allowable on your income tax

scientific experimentation or engineering

clinical testing expenses are not limited

return by the amount of the credit

activities designed to aid in the

to 65% (.65) of any contract research

shown on line 2. See section 280C(b) for

development of a new or improved

expenses, there is no requirement that

special rules.

product, process, technique, formula,

expenses exceed those for a base

Line 3.—Enter the amount of credit that

invention, or computer software program

period, and the expenditure must be for

was allocated to you as a shareholder,

held for sale, lease, or license, or used

“qualified clinical testing” as defined in

partner, or beneficiary.

by you in a trade or business. For

sections 28(b)(1) and (2). Expenses that

Line 4.—If you have credits from passive

in-house research expenses (see section

qualify under section 28 cannot also

activities, see Form 8582-CR, Passive

41(b)(2)), this trade or business

qualify for the research credit under

Activity Credit Limitations, or Form

requirement will be met if your principal

section 41.

8810, Corporate Passive Activity Loss

purpose for conducting the research is

Even though you cannot use the same

and Credit Limitations, before

to use the results of the research in the

expenses to claim both the research

completing the remainder of this form.

active conduct of a future trade or

credit and the orphan drug credit, any

business. See section 41(b)(4).

Estates and trusts.—The orphan drug

expenses used in computing the orphan

credit on line 4 is allocated between the

The research credit is generally not

drug credit must be included in any

estate or trust and the beneficiaries in

allowed for the following types of

research credit “base amount”

the same proportion as income was

activities:

computations in future years.

allocated. On the dotted line to the left

Cat. No. 13701S

Instructions For Form 6765 - Credit For Increasing Research Activities - 1992

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