- 9 - 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.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
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