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to demonstrate that the claimed Schedule C expenses were paid or
incurred "in carrying on any trade or business" within the
meaning of section 162(a).
Although neither party argued the point on brief, we believe
that petitioner's claim that these expenses were for "research
and development" warrants our consideration whether the expenses
may be deductible under section 174 as "research and
experimental" expenditures. Expenditures deductible under
section 174 need only be paid or incurred "in connection with"
the taxpayer's trade or business, whereas expenses deductible
under section 162 must be paid or incurred "in carrying on" such
trade or business. The section 174 requirement is less strict.
See Snow v. Commissioner, 416 U.S. 500 (1974); Diamond v.
Commissioner, 92 T.C. 423, 439 (1989), affd. 930 F.2d 372 (4th
Cir. 1991); Green v. Commissioner, 83 T.C. 667, 686-687 (1984).
Thus, section 174 might require a lesser showing than section 162
of the trade or business activities actually conducted by
petitioner in 1990. Nonetheless, we conclude that section 174
does not help petitioner because the record in this case does not
support the conclusion that the claimed expenses constitute
section 174 expenditures.
Research and experimental expenditures generally refer to
research and development costs in the experimental or laboratory
sense. Sec. 1.174-2(a)(1), Income Tax Regs. The term includes
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