Last Updated : January 14, 2009
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8820

Form 8820

Orphan Drug Credit

PURPOSE OF THE FORM:

Use Form 8820 to claim the Orphan drug credit. This credit is 50% of the Qualified clinical testing expenses paid or incurred during the tax year. Refer section 45C and regulations section 1.28-1 for detailes.
This credit is a part of general business credit.

QUALIFIED CLINICAL TESTING EXPENSES:

Generally, Qualified clinical testing expensesare amounts paid or incurred by the taxpayer that would be described as Qualified research expenses under section 41, with 2 modifications.

  • In section 41(b)(2) and (3), clinical testing is substituted for Qualified research and
  • 100% (instead of 65% or 75% ) of contract research expenses are treated as clinical testing expenses.
  • Qualified testignexpenses do not include expenses to the extent they are funded by a grant, contract, or otherwise by a governmental entity or another person.
  • The credit is not allowed for clinical testing conducted outside the United States unless there is an insufficient U.S testing population and the testing is conducted by U.S person or by another person not related to the taxpayer.

Line 1:
Enter on this line the taxpayer's share of the group's qualified clinical testing expenses.

Line 2:
The program multiplies line 1 amount by 50% and enters the result on this line.
Reduce the deduction for Qualified clinical testing expenses otherwise allowable on his tax return by the amount of the credit shown on line 2.

Line 3:
The program transfers the amount from schedule K-1PS and schedule K-1ET line named Orphan Drug Credit.

Line 4:
The program adds line 2 and line 3 and enters the result here and also reports this amount on FORM 3800.

Line 5 and Line 6:
These lines are not applicable to individuals.

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