-401-
respondent disallowed, consistent with the Commissioner’s
position in Estate of Cook v. Commissioner, T.C. Memo. 1993-581.
In Estate of Cook, this Court sustained the Commissioner’s
determination disallowing the portion of the $980,000 expense
claimed by George Cook as a deduction under section 174(a). The
parties agreed in the Estate of Cook case that IRC was not
engaged in a trade or business within the meaning of section
162(a). The Kanters here do not contend otherwise. The Kanters
contend, however, as Kanter argued for the taxpayers in the
Estate of Cook case, that the expense nevertheless qualified as a
deduction under section 174(a) as a research or experimentation
expense.
This Court, in the Estate of Cook case, held the expense was
not a research or experimentation expense within the meaning of
section 174(a) based on the premise that, to qualify under
section 174(a), two requirements must be satisfied: (1) The
taxpayer must have an objective intent to enter into the trade or
business envisioned by the licensing agreement, and (2) the
taxpayer must demonstrate the capability to engage in such trade
or business. The Court went on to conclude that IRC failed to
meet both of these tests. Of significance to the Court was the
fact that the taxpayers had not established that IRC had obtained
any ownership rights in any technology to be developed by Newport
because Sloan-Kettering was not a party to and had not consented
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