Utah Jojoba I Research, William G. Kellen, Tax Matters Partner - Page 44

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               Kellen exercised Utah I's option under the R&D agreement on             
          December 31, 1982, when he signed the license agreement.  There              
          is no evidence in the record that any useful technology ever was             
          developed by U.S. Agri for Utah I under the terms of the R&D                 
          agreement.  However, even if any technology had been developed,              
          under the terms of the license agreement, the licensor, Utah I,              
          relinquished any control over the technology for a 40-year                   
          period.                                                                      
               Utah I's election, contemporaneous with its execution of the            
          R&D agreement, to convey the "right to utilize the technology                
          developed" to U.S. Agri exclusively for a 40-year period reflects            
          the passive nature of Utah I's investment.  Additionally, it is              
          evident from the words of the R&D agreement that Utah I was not              
          going to be actively involved in the development of the jojoba               
          plantation.  As section 2 of the R&D agreement states:                       
               The Partnership * * * [Utah I] hereby engages                           
               Contractor * * * [U.S. Agri] to conduct the R&D Program                 
               and Contractor * * * [U.S. Agri] accepts such                           
               engagement hereunder and agrees to use its best efforts                 
               to develop a Jojoba plantation in the vicinity of                       
               Desert Center, California, at a specific location to be                 
               selected by Contractor * * * [U.S. Agri] to be used to                  
               conduct research on the domestication, commercial                       
               cultivation, planting and irrigation techniques, weed,                  
               disease and insect management and harvesting of the                     
               Jojoba plant.  Said plantation to be eighty (80)acres.                  
          It is unlikely that Kellen ever intended Utah I to enter into a              
          trade or business.  The contractual arrangements between Utah I              
          and U.S. Agri made the prospects unrealistic that Utah I would               





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