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relation to the value of that which was acquired, did
not conform to industry norms, and precluded any
realistic opportunity for profit.
the estimates used by the partnerships for projected
oil recovery from the use and application of the EOR
technology licensed by the partnerships are not
supported by credible expert testimony in this case and
were not reasonable. [Id. at 169; citations omitted.]
With regard to the lack of development of the EOR
technology, we stated in Krause that the --
portfolio [of EOR technology] consisted of a package of
vague, largely untested ideas, that, if and to the
extent ever developed, would likely be available
generally in the marketplace and on much more favorable
terms than from the partnerships. We reject
petitioners' argument that the portfolio of EOR
technology obtained by the partnerships represented
anything of any substantial value. The EOR technology
license agreements entered into * * * were essentially
valueless. [Krause v. Commissioner, 99 T.C. at 175.]
With regard to the lack of validity of the debt obligations
of the partnerships, we stated in Krause that --
The multimillion dollar license fees and royalties
* * * were excessive. They did not reflect arm's-
length obligations, and they are not to be recognized
as legitimate obligations of the partnerships. The
debt obligations of the partnerships associated
therewith did not constitute genuine debt obligations
and are to be disregarded. [Id.; citations omitted.]
In summary, in Krause, among other things, we concluded that
the partnerships, the various license and lease agreements, the
EOR technology, and the purported debt obligations of the
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