Tom, a calendar year taxpayer, informs you that during the year, he incurs expenditures of $40,000 that qualify for the incremental research activities credit. In addition, Toms research-credit base amount for the year is $32,800.

a. Determine Tom's incremental research activities credit for the year..............

b. Tom is in the 24% tax bracket. Determine which approach to the research expenditures and the research activities credit (other than capitalization and subsequent amortization) would provide the greater tax benefit.

Total tax benefit of Choice 1 - Reduce the deduction by 100% of the credit and claim the full credit: $....................... Total tax benefit of Choice 2 - Claim the full deduction, and reduce the credit by the product of 100% of the credit times 21%: $........................ Therefore, Tom should select Choice 2