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Sec. 195(a). An exception to this general rule is made in the
case of research and experimental expenses, which may be
currently deductible under section 174(a) even before the advent
of an active trade or business. Sec. 195(c); Snow v.
Commissioner, 416 U.S. 500 (1974).
We find that the majority of the expenses incurred in
connection with the yacht are not deductible expenses, but rather
are nondeductible personal expenses. See sec. 262(a). Mr.
Brayshaw’s research essentially entailed using the boat to drift
around the bay while taking measurements using global positioning
equipment. It is doubtful that the use of a 34-foot yacht was
necessary in making these measurements. More importantly,
however, we do not accept petitioners’ assertion that they used
the yacht exclusively for business purposes during the entire
year, never deriving any personal use therefrom. In the absence
of any contemporaneous substantiation of both the research and
personal use of the boat, we hold that the interest paid in
connection with the yacht (presumably for a purchase money loan),
the cost of insuring the yacht, the cost of the yacht’s usual
berth, and the costs of repairing and maintaining the yacht are
not deductible. See sec. 274(d). Likewise, without addressing
petitioners’ attempt to establish a basis in the yacht,
petitioners are not entitled to depreciation deductions for the
yacht. See id.
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