a. The amount of Alison's qualified research expenditures for the tax year is $251,250.
b. Alison's incremental research activities credit is $20,250.
a. Alison's qualified research expenditures:
Qualified research expenditures=In-house wages+ In-house supplies+ (Research services× 65%)
Qualified research expenditures=$125,000+$12,500+ ($175,000×65%)
Qualified research expenditures=$125,000+$12,500+$113,750
Qualified research expenditures=$251,250
b. Alison's incremental research activities credit:
Incremental research activities credit=(Qualified research expenditures-Base amount)×20%
Incremental research activities credit=($251,250-$150,000)×20%
Incremental research activities credit=$101,250×20%
Incremental research activities credit=$20,250
Inconclusion the amount of Alison's qualified research expenditures for the tax year is $251,250 and Alison's incremental research activities credit is $20,250.
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