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believes it is entitled to claim. There can be no
assurance that these deductions may not be contested or
disallowed by the Service * * * . Such areas of
challenge may include * * * expenditures under the R &
D Contract * * * .
* * * * * * *
The Service is presently vigorously auditing
partnerships, scrutinizing in particular certain
claimed tax deductions. * * * Counsel’s opinion is
rendered as of the date hereof based upon the
representations of the General Partner * * * . Counsel
shall not review the Partnership’s tax returns. * * *
(d) Deductibility of Research or Experimental
Expenditures.
The General Partner anticipates that a substantial
portion of the capital contributions of the Limited
Partners to the Partnership will be used for research
and experimental expenditures of the type generally
covered by Sections 174 and 44F of the Code
(particularly in recently issued IRS regulations issued
thereunder). However, prospective investors should be
aware that there is little published authority dealing
with the specific types of expenditures which will
qualify as research or experimental expenditures within
the meaning of Section 174, and most of the
expenditures contemplated by the Partnership have not
been the subject of any prior cases or administrative
determinations.
There are various theories under which such
deductions might be disallowed or required to be
deferred. * * * No ruling by the Service has been or
will be sought regarding deductibility of the proposed
expenditures under Section 174 of the Code.
A section entitled “Tax Aspects” contains the following
information concerning a legal opinion from outside counsel
obtained by the general partner:
The General Partner has received an opinion of counsel
concerning certain of the tax aspects of this investment.
The opinion * * * is available from the General Partner.
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Last modified: May 25, 2011