- 34 -
(f) Over $187,500 42.5%"
It is evident from the words of the licensing agreement that
Cactus Wren was not going to be actively involved in the
development of the jojoba plantation. As paragraph 2 in section
A points out:
Said agreement provides that upon the sole
determination by Mockingbird Plantations, Inc. as
Contractor, that the seed and/or bean of the jojoba
plants developed may be sold commercially, then and in
that event commercial farming and marketing shall be
conducted pursuant to this Agreement.
The licensing agreement also states "that this Agreement in no
way constitutes a partnership or a joint venture between Licensor
* * * [Cactus Wren] and Licensee * * * [MBP]."
"A taxpayer that funds research by another party in return
for royalties is clearly no more than an investor making a
capital contribution to the trade or business of another." LDL
Research and Development II, Ltd. v. Commissioner, F.3d.
(10th Cir., Sept. 8, 1997), affg. T.C. Memo. 1995-172. It is
clear that Yuma Mesa and Cactus Wren funded the "research
activities" of HTP and MBP with the expectation of royalties from
the sale of the jojoba beans. As the farm manager for both
plantation I and II, AI is the only entity that appears to have
been engaged in a trade or business related to jojoba farming.
The actions of the general partners and the four initial
investors in the project, including irregular visits to the
plantation sites and sending letters and photographs that
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