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Appeals from the Decisions of the United States Tax Court.
Before WIENER, DENNIS, and OWEN, Circuit Judges.
PRISCILLA R. OWEN, Circuit Judge.
Basim Shami, Rania Ardah, Arthur J. Goertz, Jo McCall Goertz, Farouk Shami, Izziah Shami, Shaukat Gulamani, Rami Shami, Najat Badran, John McCall, and Kathy McCall (collectively, Petitioners) appeal the United States Tax Court’s judgments upholding in part the deficiency asserted by Respondent–Appellee Commissioner of Internal Revenue (the Commissioner) related to research and development tax credits claimed by Farouk Systems, Inc., a company in which Petitioners were investors. We affirm in part, vacate in part, and remand for further proceedings.
Although FSI claimed that dozens of its employees engaged in qualified research each year, the bulk of its wage QREs came from the salaries of two FSI employees: Farouk Shami and John McCall. Together, their wages accounted for over 80% of the wage QREs FSI claimed in 2003, 2004, and 2005. Shami served as chairman of FSI’s board of directors in each of these years and was FSI’s president and CEO in 2003. McCall held the title of cochairman of FSI’s board of directors in 2003 and 2004. Neither Shami nor McCall has any formal education or training in chemistry or engineering.
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