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management studies, consumer surveys, advertising or
promotions. * * *
Respondent claims that the amounts paid to U.S. Agri by Utah
I in 1982 do not fall within the purview of the quoted regulation
and are not deductible under section 174. Respondent contends
that the amounts expended by Utah I were payments in connection
with U.S. Agri's farming enterprise that had the commercial
production of jojoba as the sole or primary objective.
Furthermore, most of the amounts paid by Utah I to U.S. Agri were
allocable to land development or improvement. Respondent argues
that the activities of U.S. Agri were, at most, field testing and
more likely were simply farming activities directed toward
maximizing the potential production of the jojoba plantations.
Moreover, respondent contends that no research whatsoever was
performed by U.S. Agri on behalf of Utah I. Petitioner contends
that U.S. Agri conducted valid research or experimentation
regarding cultivation of the jojoba plant on behalf of Utah I
and, consequently, under section 174(a)(1), Utah I is entitled to
deduct the contract fees paid to U.S. Agri for such research or
experimentation. The record in this case supports our conclusion
that respondent's determinations are correct, and that
petitioner's arguments to the contrary are without merit.
Attempts to farm jojoba commercially do not represent
research and development in the experimental or laboratory sense.
Cactus Wren Jojoba, Ltd. v. Commissioner, supra; Glassley v.
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