Walter J. Piszczek - Page 7

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               Under section 174, a taxpayer may deduct research or                   
          experimental expenditures.  To be eligible to claim this                    
          deduction, the taxpayer must pay or incur the expenditures during           
          the taxable year in connection with his or her trade or business.           
          Sec. 174(a)(1).  Furthermore, section 174 does not apply to                 
          expenses that are for acquiring or improving land or depreciable            
          property even though the land or property is to be used in                  
          connection with a research or experimentation activity.  Sec.               
          174(c).                                                                     
               The Supreme Court, in Snow v. Commissioner, 416 U.S. 500               
          (1974), clarified the meaning of the term "in `connection with              
          his trade or business".  In Snow, the Supreme Court compared the            
          "in `connection with his trade or business * * *" language of               
          section 174 with the "in carrying on a trade or business"                   
          language of section 162 (Emphasis added); the latter section                
          allows an immediate deduction for ordinary and necessary business           
          expenses.  The Court concluded that in contrast with section 162,           
          section 174 does not require that the taxpayer be currently                 
          producing or selling any product in order to claim a deduction.             
               Following Snow v. Commissioner, supra, this Court has held             
          that the trade or business requirement is not eliminated under              
          section 174.  Rather, section 174 requires that the taxpayer's              
          activities be aimed at engaging in a trade or business at some              
          point.  Green v. Commissioner, 83 T.C. 667, 686 (1984).                     
               Petitioner contends that he entered into the Windmill                  
          Distillery activity for profit and should, therefore, be allowed            


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