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dated March 28, 1978 between Newport and Sloan-
Kettering Institute * * *. [Emphasis added.]
Pursuant to this licensing agreement, IRC paid Newport,
during 1979, $980,000 for Newport's services for the research,
experimentation, and further development of the compound NPT-
15392. On his 1979 Federal income tax returns, Kanter claimed a
deduction for his portion of the $980,000 research and
experimentation expense. In amended pleadings, respondent
affirmatively alleged that the $311,478 loss claimed by Kanter
from this activity should be disallowed.
OPINION
In Estate of Cook v. Commissioner, T.C. Memo. 1993-581, this
Court sustained respondent's disallowance for the portion of the
$980,000 expense that George Cook had claimed as a section 174(a)
deduction. The parties agreed in Estate of Cook that IRC was not
engaged in a trade or business within the meaning of section
162(a). Kanter here does not contend otherwise. However, he
argues that the expense nevertheless qualified as a deduction
under section 174(a) as a research or experimentation expense.
This Court held in Estate of Cook that the expense was not a
research or experimentation expense within the meaning of section
174(a) based on the premise that, to qualify under section
174(a), two requirements must be satisfied: (1) The taxpayer
must be legally entitled to enter into a trade or business
exploiting research and (2) the taxpayer must demonstrate a
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