Utah Jojoba I Research, William G. Kellen, Tax Matters Partner - Page 33

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          the early 1980's to reduce the cost of commencing and engaging in            
          the farming of jojoba by claiming, inaccurately, that capital                
          expenditures in jojoba plantations might be treated as research              
          or experimental expenditures for purposes of claiming deductions             
          under section 174.  Cactus Wren Jojoba, Ltd. v. Commissioner,                
          T.C. Memo. 1997-504; Glassley v. Commissioner, T.C. Memo. 1996-              
          206; Stankevich v. Commissioner, T.C. Memo. 1992-458.                        
               Furthermore, in this case, it is questionable whether Utah              
          I's liability under its R&D agreement with U.S. Agri ever became             
          fixed.  According to its terms, the R&D agreement Utah I entered             
          into with U.S. Agri on December 31, 1982, expired upon Utah I's              
          execution of the license agreement.7  Kellen, as general partner             
          of Utah I, extinguished Utah I's liability under the R&D                     
          agreement by contemporaneously executing the license agreement               
          with the R&D agreement.  As an experienced attorney and bank                 
          executive, Kellen was capable of reading and understanding the               
          details of the R&D agreement and the license agreement he                    
          executed on behalf of Utah I.  Kellen showed a lack of concern               


          7    Paragraph 11 of the R&D agreement states:                               
               11.  Terms of this Agreement                                            
                    This Agreement shall be effective as of the date                   
               hereof, and shall terminate upon the first to occur of                  
               the following:                                                          
                    a.  Upon the execution of the License Agreement                    
               referred to in Paragraph 10.a hereof;                                   




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