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are unreasonable. Respondent’s position is that petitioner did
not pay or incur the research expenses in connection with his own
trade or business and that petitioner did not have the objective
intent to prospectively enter into his own trade or business with
the developed technology.
Petitioners argue that “There was a realistic prospect that
* * * [petitioner] would enter a trade or business involving the
software he developed.” (Emphasis added.) Petitioners do not
argue that at the time petitioner incurred the R&D expenses, he
was already engaged in a trade or business; petitioners’ focus is
solely upon the prospective probability that petitioner would
engage in a trade or business with the developed technology.14
In its petition, CPSG, Inc. alleged that if the Court determines
that Mr. and Mrs. Saykally are not entitled to the claimed R&D
deductions, then CPSG, Inc. is so entitled. CPSG, Inc. abandoned
this argument. Ryback v. Commissioner, 91 T.C. 524, 566 n.19
(1988). Therefore, we express no opinion as to this issue.
The Trade or Business Requirement
With respect to section 174, the U.S. Supreme Court has
interpreted the trade or business requirement expansively. Snow
14Petitioners argue that petitioner was “capable of
exploiting the new products;” “At the time the section 174
expenses were paid, there was a realistic prospect that
petitioner would enter a trade or business involving the new * *
* products;” and that he “intended to market the Developed
Technology to new customers as well as existing customers of
CPSG.” (Emphasis added.)
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