Dr$.$ John Anderson previously worked as a research scientist for Sensor Inc., a company that develops tiny sensors that detect and identify trace amounts of chemicals in the air. Sensor Inc. markets and sells the sensors to industrial companies to assist with leak and hazardous agent detection. Anderson plans to license the technology and develop the sensor for a device that would help physicians detect early$-$stage cancers. Patients would breathe directly into the device, which would analyze a user's breath for traces of key compounds associated with the most common cancers. In addition to eliminating the need for invasive biopsy procedures, the screening tool would also be inexpensive, easy to use and provide immediate results.

In $2012,$ Anderson applied for the trademark for "BreatheScreen" with the United States Patent and Trademark Office and was granted the trademark in November $2012.$ In addition to the small entity electronic filing fee of $$375$ for the trademark, Anderson paid $$2,500$ to a lawyer who assisted him with the filing process.

The following provides a summary of events for $2013$:

$1$ On January $2,$ Anderson, together with three investors, established BreatheScreen Inc. BreatheScreen issued $17,000,000$ common shares to investors for $$2$ per share.

$2.$ Also on January $2,$ BreatheScreen issued an additional $3,000,000$ shares, which were given to Anderson in exchange for the trademark "Breathe Screen." The trademark is viewed as a key success factor to the business.

$3$ On January $5,$ BreatheScreen signed a one$-$year licensing agreement with Sensor Inc. The licensing period began on February $1,2013,$ and the annual fee of $$3,000,000$ was paid infull.

$4.$ On January $10,$ Breathe Screen purchased new machinery that will be used in the production of the BreatheScreen for $$13,500,000$ in cash. An additional $$1,500,000$ was paid for installation.

$5.$ BreatheScreen contracted with a small health technology company to modify the original sensing chip to detect certain volatile organic compounds $($VOCs$)$ associated with cancer. Toward the end of February $2013,$ the health technology company delivered the required specifications and a pre$-$production model