The expenditures of Research and Development ("R&D") are reasonable costs you incur in your trade or business for activities intended to provide information to help eliminate uncertainty about the development or improvement of a product. Uncertainty exists if the information available to you does not establish how to develop or improve a product or the appropriate design of a product. Whether expenditures qualify as R&D expenditures depends on the nature of the activity to which the expenditures relate. Neither the nature of the product (or improvement) being developed, nor the level of technological advancement matters when making this determination. R&D expenditures generally include all expenditures incident to the development or improvement of a product. R&D expenditures include the expenditures of obtaining a patent, such as attorney's fees expended in making and perfecting a patent application. Product The term "product" includes any the following: Formula Invention Patent Pilot Model Process Technique Similar Property Expenditures Not Included R&D expenditures do not include expenditures for any of the following: Quality control testing Advertising or promotions Consumer surveys Efficiency surveys Management studies Research in connection with literary, historical, or similar projects The acquisition of another's patent, model, production, or process When And How To Choose Generally, you can only make the choice to deduct R&D expenditures in the first year you incur such expenditures. You choose to deduct R&D expenditures, rather than capitalizing them, by deducting them on your tax return for the year you first have R&D expenditures. If you fail to choose the method for the first taxable year in which you incur such expenditures, you cannot do so in the subsequent taxable years unless you obtain the consent of the Commissioner.