- 420 -
There were other facts of the case that the Court discussed
to support the conclusion that IRC was not engaged in a trade or
business and did not have the capacity to engage in a trade or
business. The other findings were not seriously challenged by
Kanter in the instant cases, and the Court does not consider it
necessary to discuss those facts here.
Kanter was the only witness to testify in the present case
with respect to this issue. No documentary evidence was
presented to corroborate his testimony, which was directed toward
establishing that there were certain rights to ownership of
technology that IRC could acquire from the licensing agreement
with Newport that would not fall within the umbrella of the
"Patent Rights" exception existing in favor of Sloan-Kettering.
Section 174(a)(1) generally provides:
A taxpayer may treat research or experimental
expenditures which are paid or incurred by him during
the taxable period in connection with his trade or
business as expenses which are not chargeable to
capital account. The expenditures so treated shall be
allowed as a deduction.
Section 174(a)(1) applies to expenditures paid or incurred by a
taxpayer for research or experimentation undertaken directly by a
taxpayer or to expenditures paid or incurred by a taxpayer for
research or experimentation carried on by another person or
entity on the taxpayer's behalf. See sec. 1.174-2(a)(8), Income
Tax Regs.
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