Hilary Harry Sax - Page 5

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          Unfortunately, because the materials did not fit under the                  
          requirements of building codes, petitioner could not sell the               
          idea to investors.  The cost of getting building codes revised              
          was prohibitive.                                                            
               During 1999, petitioner wrote letters to individuals and               
          entities in an attempt to cover the costs of obtaining building             
          permits to build houses and to secure investors in order to begin           
          manufacturing the building panels.                                          
               During 1999, Sax-Brook did not pay any employees or officers           
          to perform services for the business.  Petitioner was not                   
          reimbursed by Sax-Brook for any expenses incurred by him in                 
          connection with the corporation during 1999.  Sax-Brook did not             
          file a corporate income tax return with respect to 1999 with the            
          Internal Revenue Service.                                                   
               Respondent in the notice of deficiency, among other things,            
          disallowed petitioner’s Schedule C deductions in full.                      
          Respondent determined that petitioner did not establish that the            
          Schedule C expenses were ordinary and necessary business expenses           
          and that he did not substantiate the expenses.                              
               Section 162(a) allows a deduction for all the ordinary and             
          necessary expenses paid or incurred during the taxable year in              
          carrying on any trade or business.  To be deductible as a                   
          business expense, the expenditure must relate to activities which           
          constitute the current carrying on of an existing trade or                  

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