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execution of a promissory note for $23,920. Petitioner was to
make payments of $2,600 each year from 1983 through 1985, $2,100
per year from 1986 through 1991, and a final payment of $3,520 in
1992 on the promissory note. The record reflects that petitioner
actually paid $10,000 in 1982, $2,600 per year from 1983 through
1985, $2,100 per year from 1986 through 1988, and $8,276 in 1989,
totaling $32,376.6
The offering identified William Kellen (Mr. Kellen) as the
general partner and U.S. Agri as the contractor for the R & D
program under an R & D agreement. Additionally, a license
agreement between Utah I and U.S. Agri granted U.S. Agri the
exclusive right to utilize technology developed for Utah I for 40
years in exchange for a royalty of 85 percent of all products
produced. The offering included copies of both the R & D
agreement and the license agreement. The R & D agreement was
executed concurrently with the license agreement.
According to its terms, the R & D agreement expired upon the
partnership's execution of the license agreement. Since the two
were executed concurrently, amounts paid to U.S. Agri by the
partnership were not paid pursuant to a valid R & D agreement but
were passive investments in a farming venture under which the
6 Apparently, in 1989, petitioner executed a ratification
agreement that allowed him to pay off the balance of the
promissory note; i.e., $2,100 per year for 1990 and 1991 and
$3,520 for 1992, at a 20-percent discount.
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