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Petitioners have not shown that the $50,000 paid to RCC in
1992 was spent on research or experimentation activities. Nor
have they shown a connection between any research or
experimentation activities and a trade or business conducted by
petitioner. Accordingly, we hold that petitioners are not
entitled to deduct their $50,000 payment to RCC in 1992 under
section 174. Additionally, because the activities of petitioner
did not constitute a trade or business, petitioners are not
entitled to deduct the expenditure as an ordinary and necessary
business expense under section 162(a).
Decision will be entered
under Rule 155.
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Last modified: May 25, 2011