Product Development Costs - Is §174 the proper way to expense

[BulldogTom]

Client has a new mousetrap for the kitchen.  Went into business and started making these things.  For the first year, spent a lot of time working out the details.  Tools, layouts, jigs, etc.  Had a great trade show at the end of the year and sold his first units of the product before the end of the year.  Still a lot of development costs compared to the sales.  I am not worried about that so much right now.  He definitely has a profit motive and it is way to early to tell if this will be a success or a failure.   I think these product development costs should be capitalized and amortized over 60 months under §174 Research and Experimental Costs.

 

Anyone have a problem with that?  I just make the election and put it into fixed assets and go for 60 months?

 

Please tell me if you think I am wrong.

 

Thanks

 

Tom

Newark, CA

[kcjenkins]

Sounds reasonable to me, although I have not researched it yet.

[jklcpa]

Sounds ok to me too. Amortization begins in the month the first economic benefit is realized, not the beginning of the tax year you are filing.