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inadmissable hearsay.16 Fed. R. Evid. 802. Therefore, based
upon the record, petitioner has failed to substantiate his
claimed deduction for contributions of property, and the
deduction is accordingly denied.
Schedule C Expenses
Petitioner claimed a deduction totaling $2,618 for expenses
listed on Schedule C of his return, in columns17 denominated
"Advertising", "Bad debts * * * ", "Commissions and fees",
"Depreciation and section 179 expense deduction * * * ", and
"Meals and entertainment". At trial, petitioner testified that
these expenses were "basically * * * all R and D", incurred for
"a lot of research" that petitioner undertook in an effort to
develop a computer software package. Petitioner also testified
that the Schedule C expenses were incurred in connection with a
"market survey" undertaken shortly after his arrival in Hong
Kong.
Respondent proposes to disallow any deduction for the
Schedule C expenses on the grounds that petitioner has failed
either to substantiate that the expenses were paid or incurred or
to demonstrate that they were paid or incurred in carrying on a
trade or business as required by section 162(a).
16See supra note 5.
17Certain dollar figures on the Schedule C were typed too
far from any column category to permit a determination of the
category under which petitioner meant to classify the expense.
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