- 15 -
Amortization 131 3,057
Bank charges 50 20
Prof. fees 460 ---
Travel 895 ---
Meals &
entertainment 1,511 ---
Telephone 8,941 7,276
Leasing --- 1,130
Office exp. --- 219
Postage --- 618
Total $13,218 $13,357
As to the corporation's activities in 1989 and 1990,
petitioner testified that, for 1989:
It was active but it was not active in marketing
of the clothing at that point in time. There was not a
lot of sales being generated at that point in time. We
were actively marketing the fundraising at that point
in time.
and, for 1990:
We were fulfilling all the obligations for the
future shareholders as well as the shareholders that
were putting Exotic Bodies together. All marketing,
all research, all development.
Petitioners' argument is that the corporation had entered
into business in 1988 and that its expenditures in 1989 and 1990
"were to extend its existing line of business to the higher end
merchandise market". Petitioners rely on Briarcliff Candy Corp.
v. Commissioner, 475 F.2d 775 (2d Cir. 1973), revg. T.C. Memo.
1972-43, for the proposition that a taxpayer's expenditures in
furtherance of its attempt at expansion are currently deductible
under section 162(a). Respondent argues that, in 1989 and 1990,
the corporation had not yet entered into a trade or business and
that its expenditures during those years were nondeductible
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