Max Studio Designer’s Process Doesn’t Merit Research Tax Credit

A fashion designer can’t claim nearly $750,000 in research tax credits because his company’s techniques in developing clothing didn’t show uncertainty worthy of being claimed as research, the U.S. Tax Court said.

Leon Max Inc., a California fashion company founded by Leon Max and which sells under brand names including Max Studio, claimed research credits under tax code Section 41 of $426,255 and $322,700 for its 2011 and 2012 tax years. The credits were claimed for multistep processes of fabric, patterns, draping, trimming, and quality assurance tests completed during clothing development.

The IRS disallowed the credits, ...