- 24 - transaction. The option expired. There were negotiations. The exchange of stock for assets occurred, apparently in 1985, and perhaps on terms more favorable to IRC’s and RIC’s shareholders than were provided for in the option agreement. From the foregoing, it is clear that (1) the “upcoming business” was Systems’, (2) IRC and RIC were created to provide investment capital for Systems’ trade or business, and (3), if things worked well, then IRC and RIC would end up with Systems stock and not with their own trade or business. Although the R & D Agreement appeared to provide IRC and RIC with rights that theoretically they might be able to exploit in their own trades or businesses, (1) neither party to the R & D Agreement bothered to comply with some of the Agreement’s specific obligations, and (2) if the rights really turned out to be valuable, then Systems had an absolute right to acquire them. In fact, even though Systems let the option agreement expire, that merely resulted in a negotiated merger into Systems and not trades or businesses for IRC and RIC. Thus, although the 1985 events deviated from the 1984 option agreement, the 1985 events confirmed17 that element of the 1984 option agreement that controls for our purposes--Systems bought out IRC’s and RIC’s 17See Levin v. Commissioner, 832 F.2d 403, 406 n.3 (7th Cir. 1987), affg. 87 T.C. 698 (1986); MedChem (P.R.), Inc. v. Commissioner, 116 T.C. 308, 310 n.2 (2001), on appeal (1st Cir., Aug. 24, 2001).Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Next
Last modified: May 25, 2011