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work related to a safety program, unrelated to the music
business.2)
At some indeterminate point petitioner conceived of a unique
keyboard instruction system, which he called "Presto". Presto is
a system of teaching keyboard techniques revolving around
flexible lesson plans. Petitioner thought that his system could
be marketed in the form of a video, software, written material,
or another interactive form. He hoped it could be sold to school
systems. However, petitioner did not actually produce any
marketable video, software, or written material but instead
continued to consider and investigate various possibilities.
Petitioners have never received any gross income from the
sale of any product associated with Presto. Petitioners reported
losses on their Schedule C related to Presto for at least 8
consecutive years (1985 through 1992), claiming expenses during
those years of more than $65,000. During 1992 and up to and
including the time of trial, petitioner was still in the process
of developing Presto. In 1992, petitioners maintained no
separate bank account, had no customers, and kept no books for
the Presto activity. Petitioners stipulated: “During the 1992
tax year there was no need for petitioners to maintain a separate
bank account for the Presto activity because it was not an income
2 Respondent made no adjustments in the notice of
deficiency regarding petitioners’ Schedule C for 1991. We
therefore make no findings concerning it.
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