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discoveries resulting from the putative research or
experimentation. Rather, we conclude that any research or
experimentation that HJI conducted on Turtleback I was for its
own benefit and on its own behalf.
3. The Expenditures Must Be Paid or Incurred in Connection
with the Taxpayer's Trade or Business
Petitioners contend that the putative research or
experimentation expenditures were paid or incurred in connection
with JDP's trade or business. According to petitioners, the
research was done in contemplation that JDP and HJI would form a
joint venture with the express purpose of commercially and
profitably farming jojoba upon the expiration of the research
program if it was determined at that time that such venture would
be commercially feasible. Furthermore, petitioners assert, the
joint venture subsequently was formed, and it operated a
commercial jojoba plantation on which the discoveries from the
research or experimentation were used.
Respondent contends, on the other hand, that JDP was only a
passive investor that never engaged in or planned to engage in
its own separate trade or business. Respondent asserts that the
passive nature of the investment is reflected in JDP's
willingness to enter into the R & D Agreement without retaining
any proprietary rights to any technology developed and where any
discoveries obtained from the field testing would be available to
anyone in the jojoba industry. Respondent contends that JDP's
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