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events test is met with respect to that expense, see sec. 461(a)
and (h).9
Based on our examination of the entire record in this case,
we find that petitioner has failed to show that it is entitled to
deduct for the year at issue the claimed royalty expense.10
9We note that petitioner attempted to introduce the pur-
ported product usage document into evidence in order to prove the
truth of the matters asserted therein. The Court sustained
respondent’s hearsay objection to the admission of that document
into evidence. However, the Court did admit the purported
product usage document into evidence solely for the limited
purposes of showing that Mr. Miller relied on that document in
order to prepare both the royalty adjusting journal entries and
petitioner’s tax return for the year at issue.
We also note that petitioner claims that the purported
product usage document reflects the “royalties payable to CMC
based on the number of bottles of product sold (and the average
price per bottle) attributable to CMC’s direct-mail pieces.” On
the instant record, we reject petitioner’s claim. In addition,
we have serious reservations about the reliability of the pur-
ported product usage document. We note first that Ms. Wu gave
that document to Mr. Miller in September 1994, approximately
eight months after the close of petitioner’s taxable year ended
Jan. 31, 1994. Although the purported product usage document
purports to cover that year, the document shows only an “ESTIMATE
FOR: 2/1/93-7/31/93", the first six months of that year.
Furthermore, the purported product usage document is a purported
summary of underlying records relating to the royalty expense
payable to CMC under the Vita-CMC agreement. However, the record
in the instant case is devoid of any evidence (such as corporate
records of the Braswell sales corporations showing gross sales on
which the royalty payable to CMC under the Vita-CMC agreement was
calculated, canceled checks, general ledgers, accrual workpapers,
invoices, expense or payable journals, etc.) which establishes
that the purported product usage document is accurate. Nor does
the record contain any evidence establishing that petitioner was
liable for the year at issue (or any other year) for the royal-
ties due CMC under the Vita-CMC agreement.
10We have considered, and find to be without merit and/or
irrelevant, all of the arguments and contentions of petitioner
(continued...)
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