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because petitioner’s own statements with regard to his activities
make it clear that his expenditures were incurred in organizing,
developing, or starting up a business, we need not choose one
rationale over the other.5 Petitioner’s expenditures would be
nondeductible under either analysis.6
We therefore agree with respondent that the loss shown on
petitioners' Schedule C for 1992 must be disallowed.7
Addition to Tax and Penalties
Section 6651 provides that in case of failure to file a
timely return (including extensions), unless it is shown that
such failure is due to reasonable cause and not due to willful
neglect, there shall be added to the amount required to be shown
as tax on such return 5 percent of the amount of such tax if the
failure is for not more than 1 month. Petitioners did not
request an extension. Their 1992 income tax return was due April
15, 1993, but was filed on April 27, 1993. Thus, petitioners are
5 Petitioner has characterized his Presto activities as
“research and development”, apparently in an attempt to bring
them under sec. 174. Even if we were to find that his activities
came within that rubric (which we do not), petitioner is not
helped. He has not demonstrated a “realistic prospect” of
subsequently entering a business in connection with the fruits of
the research; i.e., by manifesting both the objective intent to
enter such a business and the capability of doing so. Kantor v.
Commissioner, 998 F.2d 1514, 1518 (9th Cir. 1993), affg. in part
and revg. in part T.C. Memo. 1990-380.
6 See also Pino v. Commissioner, T.C. Memo. 1987-28.
7 Respondent allowed the mortgage interest and real estate
taxes on petitioners’ residence, plus State taxes and
contributions, as Schedule A deductions in the notice of
deficiency.
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