On February 11, 2021, the Tax Court issued a Memorandum Opinion in the case of Little Sandy Coal Co. Inc. v. Commissioner (T.C. Memo. 2021-15). The primary issue presented in Little Sandy Coal Co. Inc. v. Commissioner was whether the activities of the petitioner’s subsidiary’s research in developing the ships constituted elements of a process of experimentation for purposes of IRC § 41(d)(1)(C) and Treas. Reg. § 1.41-4(a)(6). Holdings, in Brief in Little Sandy Coal Co. Inc. v. Commissioner The requirement of IRC § 41(d)(1)(C) and Treas. Reg. § 1.41-4(a)(6), that at least 80% of a taxpayer's research must constitute elements of a process of experimentation applies to activities—not to physical components of the product being developed or improved. Consequently, the requirement is not satisfied simply because at least 80% of the product's elements differ from those of products the taxpayer previously developed.  One who provides services in direct supervision or…