> But it’s misleading to suggest you earned 0 profit. That dev effort is going to apply its value to the company over time. I would be with you except that Sec

> But it’s misleading to suggest you earned 0 profit. That dev effort is going to apply its value to the company over time. I would be with you except that Section 174 just says the following: [0[ .03 Activities that are treated as software development. Activities that are treated as software development for purposes of § 174 generally include but are not limited to: (1) Planning the development of the computer software (or the upgrades and enhancements to such software), including identification and documentation of the software requirements; (2) Designing the computer software (or the upgrades and enhancements to such software); (3) Building a model of the computer software (or the upgrades and enhancements to such software); (4) Writing source code and converting it to machine-readable code; (5) Testing the computer software (or the upgrades and enhancements to such software) and making necessary modifications to address defects identified during testing, but only up until the point in time that: (a) In the case of computer software developed for use by the taxpayer in its trade or business, the computer software is placed in service; and (b) In the case of computer software developed for sale or licensing to others, technological feasibility has been established, product masters(s) have been produced, and the computer software is ready for sale or licensing to others; and (6) In the case of computer software developed for sale or licensing to others (or the upgrades and enhancements to such software), production of the product master(s). It makes sense to think of some degree of capitalization for software development but this definition is not defensible for anyone who has the least understanding of how software businesses (including SaaS) actually work. It sounds like it was written in the 1970s. [0] https://www.irs.gov/pub/irs-drop/n-23-63.pdf https://www.irs.gov/pub/irs-drop/n-23-63.pdf