George F. Walker - Page 7

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          petitioner attempted to sell to local municipalities and school             
          districts.  According to petitioner, had a school district pur-             
          chased one of his minority education programs, that school                  
          district would have been eligible for grant money that had been             
          set aside by the U.S. Department of Education.  Petitioner claims           
          that he would have prepared the necessary proposal for the local            
          government to receive grant funds from the U.S. Department of               
          Education.  As reflected in the zero gross receipts reported on             
          Schedule C-1 of petitioner's Federal income tax return, no                  
          municipality or school district purchased a minority education              
          program from petitioner during 1990.                                        
               During 1990, petitioner's two children, Wendy and Stefan               
          Walker, attended the University of Central Arkansas as full-time            
          students.  Both Wendy and Stefan resided in campus housing in               
          Arkansas, and neither ever stayed in Mr. Boswell's house with               
          petitioner during the year in issue.                                        
               The first issue for decision is whether petitioner is                  
          entitled to the trade or business deductions claimed in his 1990            
          Federal income tax return.  In the notice of deficiency, respon-            
          dent disallowed petitioner's claimed Schedule C deductions on the           
          grounds that they were not ordinary and necessary expenses of a             
          trade or business or that they were not properly substantiated.             
          In the alternative, respondent determined that the activities to            

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