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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.
OPINION
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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