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Kantor v. Commissioner, 998 F.2d 1514, 1521 (9th Cir. 1993),
affg. in part and revg. in part T.C. Memo. 1990-380.
Petitioners rely on Cleveland v. Commissioner, 297 F.2d 169
(4th Cir. 1961), affg. in part, revg. in part and remanding 34
T.C. 517 (1960), and Green v. Commissioner, 83 T.C. 667 (1984),
to support their contention that petitioner was an active
participant in RCC.
In Cleveland, Mr. Cleveland, an attorney, formed an informal
partnership with Hans Kerla, an inventor and chemist. Kerla was
working on the development and commercialization of an inorganic
binding material. Cleveland provided the funding, and Kerla
performed the experiments. Id. at 170. Cleveland also used his
business contacts to market Kerla's invention. Id. at 171. The
Court of Appeals concluded that Cleveland and Kerla were involved
in a joint venture:
Each of the parties was to participate in the
enterprise, Kerla giving his time and effort and
Cleveland providing the necessary funds, and they were
to share equally in the avails thereof. * * *
Cleveland was thereafter engaging with Kerla in the
trade or business of promoting the commercial
development of the invention in which Cleveland was the
owner of a participating one-half interest.
Id. at 173-174.
According to petitioners, petitioner was as active a
participant in RCC as Mr. Cleveland was in his joint venture.
However, they have not shown that petitioner's contribution to
RCC was comparable to Mr. Cleveland's efforts on behalf of his
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