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only in an economically unsound venture. In the event that the
R&D companies failed to commercialize the technology within 5
years from the termination of the project, the rights to the
technology passed to the Israeli Government.
In the instant case, the actions of each successful R&D
company provide further support for our conclusion that I-Tech
had no realistic prospect of entering a “trade or business”
involving new discoveries.42 Efrat, AiTech, and Oshap all
completed development of their respective technologies, and in
each instance, the R&D company exercised its buy-out option and
I-Tech exercised its equity options. The R&D companies that
successfully developed their technologies were the ones to
exploit their discoveries.
Petitioner argues that I-Tech was not legally restricted
from marketing the research. Petitioner points out that four of
the five R&D companies43 had a 6-month nonexclusive option period
in which to exploit the technology after it was completed. Thus,
42Although our decisions should not be based on hindsight,
see Diamond v. Commissioner, 92 T.C. 423, 443 (1989), affd. 930
F.2d 372 (4th Cir. 1991), we may take into account a taxpayer’s
actions in years subsequent to the years in issue in evaluating
the taxpayer’s prospects during the years in issue, see Levin v.
Commissioner, 832 F.2d 403, 406 n.3 (7th Cir. 1987), affg. 87
T.C. 698 (1986) (Tax Court was entitled to inquire whether
subsequent events were consistent with its judgment of the facts
available in the year in issue).
43Efrat, AiTech, Hal Robotics, and Cycon.
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