- 20 -
management of investments has long been held not to rise to the
level of a trade or business, regardless of the extent of the
investments or the time required to perform the managerial
functions. See Higgins v. Commissioner, 312 U.S. 212 (1941).
Petitioner argues that I-Tech controlled the research and
development of the five R&D companies and that the partnership
had a “realistic prospect” of being involved in the exploitation
of any discoveries. We address petitioner’s arguments in turn.
A. Control
Petitioner asserts that by virtue of Mr. Slavitt’s and Mr.
Yaakov’s “active involvement” with the five R&D companies, the
limited partnership controlled the research, and as a result,
establishes that the limited partnership was not a passive
investor. Petitioner points to testimony by Mr. Slavitt and Mr.
Yaakov regarding an initial inspection tour followed by frequent
visits to Israel and numerous conversations with personnel at
WorldTech,37 RSI, and the five R&D companies. While Mr. Slavitt
and Mr. Yaakov may have initially inspected the companies doing
the research to determine their potential for success and
communicated with people at WorldTech, RSI, and the five R&D
companies on a frequent basis, we believe such activity was
undertaken on behalf of I-Tech in its role as an investor in the
37It is not clear whether Mr. Yaakov was referring to
WorldTech Israel, Ltd., or its wholly owned subsidiary WorldTech
U.S. Our analysis does not change in either case.
Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NextLast modified: May 25, 2011