> "However, even if the research provider does not bear financial risk under the terms of the contract with the research recipient, if the research provider has a right to use any resulting SRE product ... costs paid or incurred by the research provider that are incident to the SRE activities performed by the research provider under the contract are SRE expenditures of the research provider for which no deduction is allowed ..."
Thus, the rule as written would make it such that contractors who write Windows drivers could deduct their expenses (as they would have no rights to Windows), but contractors who write Linux drivers may not (as they would have some rights to Linux).
In effect, the tax rules would explicitly double-tax open source software development, due to its over-broad test of whether you could have any right to the code base you've written, irrespective of whether the code you wrote actually has any practical residual value to the author.
However, in some cases people contribute software to open source projects that are not only Libre but also "Free as in Beer". Sometimes they get donations or grants to work on such projects. Heck, they might even have a contract from a company that uses this free-as-in-beer software, but, once the contributions are made, the code is free for everyone to take.
In this model, there is explicitly no forward looking profit to be had. All parties contractually agree that the value of the work, after it is done, is $0.
In this case I don't see how it would even make sense then to amortize donations/grants/contract money on a 5-year schedule when the asset value of the deliverable is $0?
I would think in this case that the person doing the development is providing a bona-fide "service industry" activity, and not doing an R&D activity. Thus the wages of that person should be as deductible as any other service-industry worker: There is as much expectation for future profits from writing this code as the person painting your house has future expectations of profits from the higher resale value of your place because of the improved paint job.
So at least for individuals being paid to work on free-to-download code, the entity paying you to do the coding may have to write off your contract as an R&D expense, but the individual contractor should still be able to depreciate that payment as a wage within the tax year because they are providing "coding services", and not doing R&D.
This logic has precedent if you consider how capital assets work. Let's say a shop purchases a donut machine. The purchaser of the donut machine has to depreciate that purchase over several years. However, the individuals who were paid to assemble the donut machine are paid wages as factory labor, and their expenses are deducted by the donut machine marker that tax year.
In this case the donut shop is whoever is paying you to write the code, and the coding contractor is the donut machine assembly technician. So long as the donut assembly technician doesn't have a stake in the donut shop's future-looking profits, I think it's quite clear who is providing a service and who owns a capital asset.
I think this logic would also mean that individual contractors who work on proprietary, for-profit code bases but assign all value of their work product immediately to the contracting body would also be a service provider and thus can depreciate their own wages within the tax year. But, the example is not as clear-cut as a work product that explicitly has a $0 expected market value.