David M. and Teri L. Saykally - Page 28

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               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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