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canceled, or rendered ineffective, the R&D contract because of
the concurrent execution of the two documents. Accordingly, San
Nicholas was never engaged in, either directly or indirectly, any
research or experimentation. Rather, San Nicholas was merely a
passive investor seeking royalty returns pursuant to the license
agreement. See Finazzo v. Commissioner T.C. Memo. 2002-56;
Kellen v. Commissioner, T.C. Memo. 2002-19; Lopez v.
Commissioner, T.C. Memo. 2001-278; Christensen v. Commissioner,
T.C. Memo. 2001-185; Serfustini v. Commissioner, T.C. Memo. 2001-
183; Carmena v. Commissioner, T.C. Memo. 2001-177; Nilsen v.
Commissioner, T.C. Memo. 2001-163; Fawson v. Commissioner, T.C.
Memo. 2000-195. Any experienced attorney capable of reading and
understanding the subject documents should have understood the
legal ramifications of the licensing agreement canceling the R&D
agreement. Petitioner failed to consult an attorney and,
further, failed to carefully scrutinize the offering himself.
Second, we are unable to accept uncritically petitioner’s
contention that he invested in San Nicholas solely to earn a
profit.20 Rather, at the time that he signed the subscription
20 It is the duty of the Court to listen to testimony,
observe the demeanor of witnesses, weigh the evidence, and
determine what to believe. The Court is not required to accept
testimony at face value, and the Court may discount a party’s
self-interested testimony and place reliance on other evidence
that is believed to be more reliable. See Christensen v.
Commissioner, 786 F.2d 1382, 1383-1384 (9th Cir. 1986), affg. in
part and remanding in part T.C. Memo. 1984-197; Niedringhaus v.
(continued...)
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