David W. Chiu - Page 23

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            generally all costs associated with the actual development of a                              
            new product, but not expenses for "efficiency surveys, management                            
            studies, consumer surveys, advertising, or promotions."  Id.                                 
            Thus, the expenses claimed by petitioner for "advertising" and a                             
            "market survey" on their face do not qualify as research and                                 
            experimental expenditures under section 174.  As to the remaining                            
            expenses--for bad debts, commissions and fees, depreciation and                              
            section 179 expense, and meals and entertainment--petitioner                                 
            offered no evidence to show how any of his expenditures of this                              
            nature was connected with the research and development of a                                  
            computer software package.  Accordingly, we conclude on this                                 
            record that petitioner has failed to show eligibility for a                                  
            deduction under section 174.                                                                 
            Failure To File                                                                              
                  Respondent also determined that petitioner is liable for an                            
            addition to tax under section 6651(a)(1) for failure to file his                             
            1990 return by its due date.  The parties have stipulated that                               
            the 1990 return was signed by petitioner on April 1, 1995, and                               
            stamped as received by respondent on July 8, 1995.  Therefore,                               
            petitioner is liable for the addition unless he can show that the                            
            failure to timely file was due to reasonable cause, and not to                               
            willful neglect, and he bears the burden of proving both.  United                            
            States v. Boyle, 469 U.S. 241, 245 (1985).  A showing of                                     
            reasonable cause requires that the taxpayer demonstrate that he                              

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