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Alternatively, the amount deducted by the partnership
as research and development expenses has been
disallowed because it has been determined that such
expenditures do not meet the requirements of I.R.C.
Section 174.
In the further alternative, the amount deducted by the
partnership as research and development expenses has
been disallowed because it has not been established
that a profit motive existed when such amounts were
paid and that the transaction was entered into other
than solely for tax purposes.
In the further alternative, the amount deducted by the
partnership as research and development expenses has
been disallowed because you have not established:
(1) That the accrual method is a proper method
for accounting for research and experimental
expenditures, or
(2) That the use of the accrual method by said
partnership clearly reflects partnership income.
In the further alternative, you have not established
that the portion of the amount deducted by the
partnership as research and experimental expenses that
is attributable to the note presented by said
partnership is not contingent or that all events have
occurred which fix the liability thereof. See I.R.C.
Section 465.
Dr. Mahoney also was a partner in HJP. On his 1981 Federal
income tax return, he claimed a net loss relating to HJP of
$30,172.
Dr. Mahoney did not testify at trial.
c. Petitioners Edward F. Houser, Jr. and Kathryn G. Houser
Petitioners Houser resided in Lubbock, Texas, at the time
they filed their petition in the instant cases. During 1981 and
1982, petitioner Edward F. Houser, Jr. (Dr. Houser) worked as a
physician, and petitioner Kathryn G. Houser worked as a realtor.
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