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comparable projects completed during the same time period and
found the VALPRO model to be highly biased in favor of producing
very low cost estimates. Moreover, we note that respondent’s
experts found the income stream from the Local Software to be
indeterminate and, thus, were unable to conclude what the 1-
percent license fee was worth as of June 21, 1985.
We need not determine the precise value of the software. We
need only compare the value of the Local Software with the
reasonably anticipated value of the future license payments in
order to determine whether the terms of the agreement are
reasonable when judged by the standards of an arm’s-length
transaction. Sparks Nugget, Inc. v. Commissioner, 458 F.2d at
635; Stearns Magnetic Manufacturing Co. v. Commissioner, 208 F.2d
at 852; Place v. Commissioner, 17 T.C. at 203.
We think it is significant that both parties’ experts
determined that the software was of some value to HSN, even
though these values are widely divergent. The parties to the
License Agreement did not obtain or rely upon an expert valuation
of the Local Software when they entered into the agreement. Nor
could they have accurately predicted the value of the 1-percent
license fee. What the parties to the agreement did know at the
time of the agreement was that (1) HSN needed a software program
that would perform the functions that the Local Software
performed, (2) HSN needed such software quickly, (3) HSC and
Pioneer, after spending a considerable amount of time developing
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