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tor’s Release and Assignment” (1997 release) with respect to the
1992 contract. The 1997 release provided in pertinent part:
Pursuant to the terms of Contract No. DASG60-92-C-
0069 [1992 contract] and in consideration of the sum of
One Million Fourty [sic] Nine Thousand One Hundred
Seventeen Dollars and NO cents ($1,049,117.00) which
has been or is to be paid under said contract with TG&C
Associates, Inc. (hereinafter called “the Contractor”)
or its assignees, if any, the Contractor, upon payment
of said sum by the UNITED STATES OF AMERICA (hereinaf-
ter called “the Government”), does hereby:
1. Remise, release and discharge the
Government, its officers, agents, and employ-
ees of or from all liabilities, obligations,
claims, and demands, whatsoever, under or
arising from the Contract * * *
At the time the 1992 contract was terminated, the computer
simulator was the property of TGC. During the taxable years at
issue and continuing until the time of trial in this case, the
computer simulator was located in the basement of petitioners’
residence.
On February 18, 1998, TGC filed a formal complaint with the
Missile Defense Command concerning improper disclosure of TGC’s
proprietary data.
On May 27, 1998, SDC notified TGC by letter that it was
terminating the 1996 contract pursuant to that contract’s limita-
tion of funds clause. As of that date, SDC had paid TGC only
$1,015,805 of the original contract amount of $8,169,616.
On March 31, 1999, TGC entered into a contract (1999 con-
tract) with the United States Army Armament Research, Develop-
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