Impact Research Corporation, Joan C. Benz, Tax Matters Person - Page 11




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          whether this was accomplished by an IRC-Systems amendment to the            
          original option agreement or a separate RIC-Systems agreement.              
               1.   Research and Development Agreement                                
               The R & D Agreement obligated IRC to pay to Systems a fixed            
          fee of $875,000 in consideration of Systems’ performance of                 
          research activities.10  In this connection, section 2.02 of the             
          R & D Agreement provides as follows:                                        
                    2.02. Payments.  In consideration for the                         
               performance of the Funded Research Effort, SII                         
               [Systems] shall receive a fixed fee of $875,000.00.                    
               Such fee shall be paid in seven (7) installments in                    
               accordance with the payment schedule set forth on                      
               Exhibit B, which hereby is incorporated herein and made                
               a part hereof.  The obligation of IRC to make payments                 
               to SII pursuant to this Section 2.02 shall be                          
               contingent upon the delivery to IRC by SII of the                      
               monthly reports required pursuant to Section 4.01                      
               hereof, and the absence of any default under Section                   
               7.03 hereof.  In consideration of such fixed fee, SII                  
               shall complete the entire Funded Research Effort                       
               irrespective of the actual cost thereof.  Regardless of                
               whether a commercially marketable technology or product                
               results from the Funded Research Effort, no part of any                


               10We note that the FSAAs disallowed research or experimental           
          expenditures deductions in the amounts of $241,700 (IRC) and                
          $631,289 (RIC), for a total of $872,989.  This is very close to             
          the $875,000 fixed fee provided for in the R & D Agreement.                 
          Also, this is almost exactly the $873,000 that petitioners ask us           
          to find as IRC’s and RIC’s payment obligation under the R & D               
          Agreement.  However, the parties have not enlightened us as to              
          whether this is an indication that the June 13, 1984, amendment             
          involved RIC’s taking over some specified portion of IRC’s                  
          original obligations under the R & D Agreement.  In light of the            
          lack of record evidence as to what was involved in the June 13,             
          1984, amendment to the R & D Agreement, we cannot tell whether              
          (1) petitioners intend to suggest that the June 13, 1984,                   
          amendment slightly reduced the contractual fee obligation, or (2)           
          the $873,000 statement is merely petitioners’ typographical error           
          that went unnoticed by respondent.                                          





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