- 10 -
1983 through 1985, $4,200 per year from 1986 through 1988, and
$16,552 in 1989, totaling $64,752.8
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 Blythe II and U.S. Agri granted U.S. Agri the
exclusive right to utilize technology developed for Blythe II 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.9 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
8 In 1989, petitioner executed a ratification agreement
that allowed him to pay off the balance of the promissory note;
i.e., $15,440 ($4,200 per year for 1990 and 1991 and $7,040 for
1992) at a 20-percent discount.
9 In the instant case, the Blythe II offering is included
in evidence as a stipulated exhibit; however, the stipulated
exhibit contains an incomplete copy of the R & D agreement that
was attached to the original offering. To the extent that
relevant facts are omitted due to the incomplete copy of the R &
D agreement (or other incomplete pieces of evidence) in the
instant case, the Court must rely on findings of fact in Utah
Jojoba I Research v. Commissioner, supra, to which the partners
of Blythe II agreed to be bound. It is petitioners' burden to
establish the context in which their deductions were taken. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933); Bixby v.
Commissioner, 58 T.C. 757, 791 (1972).
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