- 28 -
The record does not demonstrate that petitioner’s R&D
activities amounted to anything more than the development of
property rights that he intended to license to CPSG, Inc. for use
in CPSG, Inc.’s business. As such, petitioner’s activities
amounted to nothing more than those of a prudent investor.18
“‘[T]he management of investments is not a trade or business for
purposes of section 174.” Spellman v. Commissioner, 845 F.2d at
150 (quoting Green v. Commissioner, 83 T.C. at 688).
For the aforesaid reasons, we find that at the time
petitioner incurred the R&D expenditures, he did not have an
objective intent to engage in his own trade or business with the
developed technology.
Petitioners argue that the Court of Appeals for the Ninth
Circuit’s19 opinion in Scoggins v. Commissioner, 46 F.3d 950 (9th
Cir. 1995), revg. T.C. Memo. 1991-263, supports their contention
that petitioner had a realistic prospect of using the R&D in a
future business of his own. The facts in Scoggins are similar to
the instant case in some respects. Both cases involve R&D where
the person (in Scoggins a partnership) performed the R&D by
18There is no evidence of how much time petitioner devoted
to this R&D endeavor. Clearly, petitioner monitored the R&D
process via telephone, one visit to Australia, and electronic
mail communications. However, petitioners do not allege, and we
cannot find, that petitioner’s activities during the time the R&D
expenditures were made were sufficient to constitute a trade or
business.
19To which this case is appealable.
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