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January 31, 1997, through December 31, 2005.8 Petitioner
intended that the developed technology would be marketed through
CPSG, Inc.
On October 1, 1995, CPSG, Inc., Computer Power Software
Group Australia Pty Ltd.9 (CPSGAus), and petitioner entered into
a service agreement whereby CPSGAus agreed to provide
administrative and payroll services to petitioner in his efforts
to develop the software technology. CPSGAus hired some of the
Australian development staff that had been formerly employed by
the syndicates to continue the research and development on
petitioner’s behalf. CPSGAus invoiced CPSG, Inc. for these
costs. CPSG, Inc. paid the costs associated with the research
and development on petitioner’s behalf and recorded petitioner’s
indebtedness for the expenses on CPSG, Inc.’s accounting system.
Petitioner monitored the work performed by the Australian
development “team” via telephone, a visit to Australia, and
electronic mail communications. Additionally, petitioner helped
solve technical programming problems, prioritized tasks of the
8The minimum quarterly payments of $26,250 were due and
owing to petitioner regardless of whether CPSG, Inc. generated
any income from the developed technology. The development
agreement contemplated that petitioner would receive, at the very
least, $945,000 over the term of the agreement (36 quarters).
9Petitioner formed CPSGAus in 1994 to manage CPSG, Inc.’s
business activities in Australia. CPSGAus provided development,
sales, support, and administrative services to CPSG, Inc.’s
subsidiaries: InTEXT Systems, Inc., Operating Control Systems,
Inc., and Today Systems, Inc.
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