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business expenses under section 162 or were not expended for the
purpose designated. Alternatively, respondent determined that Mr.
Podd did not engage in the Amoco patent transactions between himself
and Powertex at arm's length, and, accordingly, respondent made
adjustments pursuant to section 482. Respondent initially
determined an alternative adjustment under section 482 using a 5-
percent royalty rate, resulting in a disallowance of royalty
expenses claimed for the years ending May 31, 1989, and May 31,
1990, in the amounts of $457,356 and $318,649, respectively.
Respondent's answer was amended to assert an arm's-length royalty
rate pursuant to section 482 of 0 percent.
2. The Experts’ Positions
a. Respondent’s Experts
i. Joel E. Lutzker
Mr. Lutzker received his B.A. in physics from New York
University and his J.D. from New York University School of Law. He
has been active in the fields of patents, trademarks, and copyrights
for 20 years and is currently a partner in the intellectual property
law firm of Amster, Rothstein & Ebenstein.
Mr. Lutzker's reports examined the ownership of the Amoco
patents and their validity and enforceability. Mr. Lutzker began by
examining several different theories under which Powertex could be
found to have an ownership interest in the patents. He explained
that under the "corporate opportunity" doctrine, the fiduciary
responsibility of a corporate officer to act in the corporation's
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