- 97 -
projects, he found the technical risk very low; however, he did not
determine any specific percentage in his analysis. Mr. Teixeira
conceded that all of the activities at issue provided a new or
improved business function to Norwest, although not to the banking
industry.
7. Analysis of the Eight Sample Activities
The parties' experts aided the Court in understanding research
in the context of the computer science field and the banking
industry. We did not find any one of the experts more helpful than
another. Mr. Teixeira assisted the Court by explaining the
existing state of technology in the computer science field as
related to the banking industry. Drs. McDermott and Davis offered
particular insight into software development issues, although they
were often abstract or vague. Unfortunately, with respect to all
of the experts, much of their reports and testimony was of limited
use because they applied definitions and standards that are
inconsistent with our interpretation of the seven tests that must
be satisfied to obtain the R&E credit.61 See Alumax, Inc. v.
61 There were several problems with the definitions
provided by each of the experts. For example, Dr. McDermott
appears to apply a 20-percent test to the definition of
substantial uncertainty--which we have rejected for the reasons
expressed. Additionally, his example of a hypothesis, as in the
case of the SBS project, is overly simple and not workable: "This
collection of algorithms, run on such-and-such a hardware
configuration, can perform such-and-such an account-management
task with no errors, in such-and-such a period of time." This
hypothesis cannot be used to develop true alternatives which can
be examined and considered by the taxpayer.
(continued...)
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