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Respondent determined a deficiency in petitioners’ Federal
income tax of $8,372 for the taxable year 1999. In his answer,
respondent seeks an increased deficiency of $8,904.
The issue for decision is whether petitioners are entitled
to deduct certain expenses related to research activity by
petitioner Carl Albert Rouse (petitioner).
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. Petitioners resided in
Del Mar, California, on the date the petition was filed in this
case.
During the year in issue, petitioner was involved in physics
research activities based out of his residence. In conducting
this research, petitioner used computer resources located at the
University of California, San Diego. Petitioner, who had left
his salaried position in order to conduct research at home, has
published many articles in his research field. Petitioner did
not receive any income during the year in issue related to his
research activity.
During the year in issue, petitioner was the sole
shareholder and president of a corporation known as Rouse
Research Incorporated (RRI). RRI was incorporated in California
on November 25, 1992, as a nonprofit corporation.
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