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produce the other parts and components that would complement the
enhanced engine. The damaged engine petitioner purchased cost
$7,000. Petitioner made the necessary repairs to the engine and
then made the necessary modifications to enhance the engine.
There is no dispute that petitioner reached his objective of
increasing the engine's horsepower. In arriving at that goal,
several other modifications were necessary along the way that
petitioner apparently had not anticipated. For example, with the
enhanced engine running at higher revolutions per minute,
petitioner had to make modifications to the engine's oil system.
These modifications were also successful. In addition,
petitioner purchased two used Porsche automobiles. They provided
the parts and the body into which the $7,000 engine was placed
after the engine enhancements had been completed.
The $7,000 engine that petitioner modified was not intended
to be sold but, rather, was intended to be used for purposes of
making the modifications to see if such modifications would work.
The enhanced engine was not designed for, nor was it intended to
be, a finished product but, rather, was used solely for purposes
of making the modifications that, if successful, would be
implemented on other 928 S4 Porsche engines and marketed.
Respondent agrees that petitioner was engaged, during 1991,
in an activity that qualified as research or experimentation
under section 174(a). Respondent, after issuance of the notice
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