Martin and Barbara Schachter - Page 16

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          introduce any invoices or other records to establish a business             
          purpose for the payments.                                                   
               The expert report prepared by petitioners’ expert for                  
          purposes of this litigation is based largely on out-of-court                
          statements purportedly made by petitioner regarding checks                  
          written on the Lloyds/Sanwa account.  Other than petitioner’s               
          testimony, no trial testimony or other documentary evidence was             
          offered or admitted at trial to establish the purpose of the                
          checks.                                                                     
               Although we allowed petitioners' expert’s report into                  
          evidence, much of the information relied upon by petitioners’               
          expert is vague and so speculative as to make his report largely            
          meaningless.  Soden v. Freightliner Corp., 714 F.2d 498, 500-507            
          (5th Cir. 1983); United States v. Sims, 514 F.2d 147, 149-150               
          (9th Cir. 1975); Viterbo v. Dow Chem. Co., 646 F. Supp. 1420,               
          1424 (E.D. Tex. 1986), affd. 826 F.2d 420 (5th Cir. 1987).                  
          Further, under rule 703 of the Federal Rules of Evidence,                   
          petitioners' expert’s reliance on hearsay in his report does not            
          elevate the hearsay to the status of evidence that would                    
          establish the truth of the matter asserted (namely, the business            
          nature and deductibility of alleged expenses mentioned therein).            
          Paddack v. Dave Christensen, Inc., 745 F.2d 1254, 1261-1262 (9th            
          Cir. 1984); Greenberg v. United States, 295 F.2d 903, 907-909               
          (1st Cir. 1961).                                                            






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