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In addition, we are particularly troubled by the failure of
petitioner wife to testify about the research activity. As a
full-time librarian for many years, petitioner wife likely
possessed significant expertise in the field of information
retrieval. In fact, Ms. Helen Page, the revenue agent assigned
to audit petitioners' returns, testified that petitioner husband
made several representations that his wife was the sole
participant in the research activity. Although present at trial,
petitioner wife did not testify in support of petitioners' claim
that they operated a research business for profit. It may be
presumed that her testimony, if given, would have been
unfavorable to petitioners. Mecom v. Commissioner, 101 T.C. 374,
385 n.17 (1993), affd. without published opinion 40 F.3d 385 (5th
Cir. 1994); Wichita Terminal Elevator Co. v. Commissioner, 6 T.C.
1158, 1165 (1946), affd. 162 F.2d 513 (10th Cir. 1947).
After considering the above factors, we find that
petitioners have failed to prove that they engaged in the
research activity with the requisite profit objective necessary
to support deductions under section 162(a).3 We hold that
petitioners are not entitled to deduct expenses related to their
research activity as trade or business expenses under section
162(a) because such activity was not engaged in for profit, but
that such expenditures may be deducted to the extent allowed by
3 Our finding on this point likewise precludes claiming
the disputed deductions under section 212(1).
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