- 71 -
and market the equipment in question if the corporation did not
do so. The circumstances in Scoggins are wholly different from
those presented here. See LDL Research & Dev. II, Ltd. v.
Commissioner, supra, also distinguishing the Scoggins case.
A facts and circumstances test has been employed by this
Court in determining whether there is a realistic prospect that a
partnership may enter into a trade or business with respect to
technology that is to be developed. We have considered such
factors as the terms of the parties' contractual arrangements,
the intentions of the parties involved in the arrangement, the
amount of capitalization retained by the partnership during the
research and development contract period, the exercise of control
by the partnership over the person or organization doing the
research, the business activities of the partnership, the
capacity and incentive, if any, of the partnership to use the
products in its own trade or business, and the experience of the
partners. E.g., Diamond v. Commissioner, supra at 438-440; Levin
v. Commissioner, 87 T.C. at 726-728; Mach-Tech, Ltd. Partnership
v. Commissioner, T.C. Memo. 1994-225, affd. 59 F.3d 1241 (5th
Cir. 1995); Stankevich v. Commissioner, supra; Double Bar Chain
Co. v. Commissioner, T.C. Memo. 1991-572.
The grant of an exclusive license to exploit technology
prior to commencement of research and development may preclude a
licensor from engaging in a trade or business with respect to the
technology. See Levin v. Commissioner, 87 T.C. at 726-727; Green
Page: Previous 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 NextLast modified: May 25, 2011