- 428 -
Indeed, in his testimony, Kanter could not elaborate or
describe what realistic prospects IRC would have of exploiting
commercially the technology being developed. In view of the
broad scope of the existing and potential patent rights Newport
and Sloan-Kettering held, it is difficult to believe that a third
party, such as a major pharmaceutical company, would risk a
license from IRC on technology that Newport and Sloan-Kettering
might have rights to.
Accordingly, we hold that Kanter is not entitled to a
deduction under section 174 for 1979 with respect to IRC's
claimed research and development expense. See Spellman v.
Commissioner, 845 F.2d 148 (7th Cir. 1988), affg. T.C. Memo.
1986-403; Diamond v. Commissioner, 92 T.C. 423 (1989); Estate of
Cook v. Commissioner, T.C. Memo. 1993-581.
We further hold that Kanter is not entitled to deductions
under section 162 for 1979 with respect to IRC's claimed business
deductions. IRC was not engaged in an active trade or business
during 1979 because its activities fail to satisfy even the "in
connection with" a trade or business standard of section 174.
See Estate of Cook v. Commissioner, supra.
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