Main Issue:
Funded research - rights
Facts:
Taxpayers included fixed-price contracts in which they did not have exclusive rights to what was developed
IRS argued that taxpayers did not have substantial rights
Conclusion:
Court rejected the government’s position stating the contracts allowed the taxpayer to enter into commercial contracts with third parties for the sale of items containing technology developed under the current contracts therefore substantial rights test met
Take-Away Point:
Companies performing research on behalf of others need to retain substantial rights, but not exclusive rights
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