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to reduce a tax liability. New Colonial Ice Co. v. Helvering,
292 U.S. 435, 440 (1934). The determinations of the Commissioner
in a notice of deficiency are presumed correct, and the taxpayer
has the burden of proving that the determinations are in error.
Rule 142(a); Welch v. Helvering, 290 U.S. 111 (1933).
Section 174(a)(2) permits a taxpayer to deduct currently
research and experimental expenditures that are paid or incurred
during the taxable year in connection with the taxpayer's trade
or business. The term "research or experimental expenditures" is
defined in the regulations as "expenditures incurred in
connection with the taxpayer's trade or business which represent
research and development costs in the experimental or laboratory
sense. The term includes generally all such costs incident to
the development of an experimental or pilot model, a plant
process, or similar property, and the improvement of already
existing property of the type mentioned." Sec. 1.174-2(a),
Income Tax Regs.; Kollsman Inv. Corp. v. Commissioner, T.C. Memo.
1986-66, affd. 870 F.2d 89 (2d Cir. 1989).
Section 1.174-2(a)(1), Income Tax Regs., provides that the
term "research or experimental expenditures", among other things,
does not include the costs of acquiring another's patent, model,
production, or process. Respondent asserts that this provision
precludes petitioners from claiming the cost of the Porsche 928
S4 engine as a research or experimentation expense because the
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