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At the time the petition in this case was filed, Research II
was a limited partnership with its principal place of business in
Towson, Maryland. Petitioner, Dennis W. Townsend, Research II's
tax matter partner, resides in Towson, Maryland.
Research II was formed on December 29, 1982. The general
partners of Research II are Dennis W. Townsend and Townsend &
Co., Inc. They collectively own a 1.01-percent interest in
Research II. The remaining interests in Research II are owned by
32 limited partners. Research II maintains its books and records
and files its Federal income tax returns on the accrual method of
accounting. Research II has a calendar year.
Before its formation as a limited partnership and in
connection with obtaining funds, Research II issued a
confidential memorandum which described Research II's proposed
purpose as the development of advanced cementitious composite
technology for application in the heat treatment and ceramic
industries (new technology). The confidential memorandum
explained that Research II would attempt to achieve its purpose
by engaging CemCom2 to perform research and development work on
behalf of the partnership. The confidential memorandum states
that, in engaging CemCom, the promoters of Research II
anticipated that the new technology could be used in
2 Cemcom was a research corporation formed in 1981 to research
further development and applications of cementitious composites.
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