Jefferry Phuong Vo and Mai Xuan Nguyen - Page 5




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          five people gave petitioners $1,500 or $2,000 for generators to             
          take to their countries to determine if there was a market for              
          the system.  All five returned the generators for a refund after            
          determining that they were too expensive to sell.                           
               Petitioner continued making improvements to the system and             
          attempting to establish distributors.  In 1996 petitioners sold a           
          generator for $1,500 for the personal use of one of the people              
          who had agreed to sell the generators in Vietnam.                           
               Petitioners filed a joint Form 1040, U.S. Individual Income            
          Tax Return, for 1995 and Schedule C, Profit or Loss From                    
          Business, for their activity with respect to Solarsys.                      
          Respondent issued a notice of deficiency for petitioners’ 1995              
          taxable year disallowing deductions for all the Schedule C                  
          expenses on the grounds that petitioners were not engaged in a              
          trade or business or activity for profit and determining that if            
          petitioners were engaged in such activity, the claimed expenses             
          are not ordinary and necessary.  The expenses at issue are as               
          follows:                                                                    
                    Advertising                   $94                                 
                    Car & truck expenses          256                                 
                    Depreciation             1,600                                    
                    Office expenses               103                                 
                    Rent                     12,600                                   
                    Travel                   1,875                                    
                    Meals & entertainment         100                                 
                    Utilities                3,095                                    
                    Other                         724                                 
                    Total                    20,447                                   






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