                    T.C. Summary Opinion 2007-62



                        UNITED STATES TAX COURT



          ROBERT J. AND SYLVIA DEWARD, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 2388-06S.                Filed April 25, 2007.



     Robert J. and Sylvia Deward, pro sese.

     Jeremy L. McPherson, for respondent.



     RUWE, Judge:     This case was heard pursuant to the provisions

of section 74631 of the Internal Revenue Code in effect when the

petition was filed.    Pursuant to section 7463(b), the decision to

be entered is not reviewable by any other court, and this opinion

shall not be treated as precedent for any other case.


     1
       Unless otherwise indicated, all section references are to
the Internal Revenue Code for the year in issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
                                 - 2 -

     Respondent determined a deficiency of $3,913 in petitioners’

2001 Federal income tax and an addition to tax of $583 under

section 6651(a)(1).2

     The issue the Court must decide is whether $15,892 in “other

expenses” that petitioners listed on a Schedule C, Profit or Loss

From Business, attached to their 2001 tax return are “start-up

expenditures” as defined by section 195, resulting in the

disallowance of deductions claimed for those expenditures.3

                              Background

     Some facts have been stipulated and are so found.     The

stipulation of facts and the attached exhibits are incorporated

by this reference.     When the petition was filed, petitioners

resided in Walnut Creek, California.

     Petitioner Robert J. Deward has a master’s degree in

journalism from the University of California, Los Angeles (UCLA).

Mr. Deward worked from 1970 through 1997 as a full-time




     2
       Although the notice of deficiency refers to an accuracy-
related penalty under sec. 6662(a), respondent concedes that this
was a scrivener’s error by respondent and the notice of
deficiency should have referred to the addition to tax under sec.
6651(a)(1). Respondent has since conceded that petitioners are
not liable for any addition to tax under sec. 6651(a)(1).
     3
       In the notice of deficiency, respondent adjusted
petitioners’ medical expense deductions and miscellaneous
itemized deductions because of the change in the determined
amount of adjusted gross income. The correctness of these
adjustments depends upon our resolution of the issue stated
above.
                                 - 3 -

journalist and writer for a major telecommunications company.4

He retired from that position in 1997.      Between 1997 and 2005,

Mr. Deward conducted research for a book that he plans to write

on World War I (WWI).   For 27 years, Mr. Deward has concentrated

on military tactics, model soldiers, and books relating to WWI.

He has also built up his own library on these subjects.      In 2001,

petitioners traveled to Europe for the purpose of conducting

research for the proposed WWI book.      At the time of respondent’s

examination of petitioners’ 2001 return in 2005, Mr. Deward had

not yet begun the actual writing of the book on WWI.      However, he

was still conducting research.

     Petitioners timely filed their 2001 joint Federal income tax

return, including two Schedules C.       The first Schedule C relates

to Mr. Deward and lists his principal business as “Author”.       The

second Schedule C relates to petitioner Sylvia Deward and lists

her principal business as “Interior Design”.

     Respondent issued a timely notice of deficiency to

petitioners for their 2001 tax year.      Respondent disallowed all

of the $15,892 of “other expenses” claimed on Mr. Deward’s

Schedule C.   Those expenses consisted of $1,765 of amortization

and $14,127 for research and development.      The research and

development deduction on Mr. Deward’s 2001 Schedule C consisted



     4
       The company has changed its name from Pacific Bell to
Pacific Telesis and is currently called SBC.
                                - 4 -

of expenses petitioners incurred while on a trip to Europe in

2001 and of research expenses, all related to the proposed WWI

book.    In support of his claimed deductions, Mr. Deward provided

a letter from a publisher, Military History Press L.L.C., dated

August 15, 2005, saying that they would like to review his

materials “with an eye to future publications”.      Mr. Deward also

provided a document titled “The Development of Military Doctrine

by the German and British Armies During the Course of the Great

War” which he presented to his local chapter of the “Great War

Society” in September 2006.

                              Discussion

     Section 162(a) generally allows a deduction for all ordinary

and necessary expenses paid or incurred during the taxable year

in carrying on a trade or business.     What constitutes a trade or

business is not statutorily defined; rather, it requires an

examination of the facts in each case.       Commissioner v.

Groetzinger, 480 U.S. 23, 36 (1987).       To be engaged in a trade or

business, the taxpayer must be involved in the activity with

continuity and regularity, and the taxpayer’s primary purpose for

engaging in the activity must be for income or for profit.       Id.

at 35.

     Respondent alleges that as of the close of 2001, Mr. Deward

had not begun the actual writing of his book on WWI, nor had he

created an outline.   Respondent argues that Mr. Deward was,
                               - 5 -

therefore, not engaged in the conduct of the active trade or

business of being an author in 2001.   Rather, respondent avers

that Mr. Deward’s expenses in performing research for the book he

hopes to write are “start-up expenditures” as defined in section

195(c)(1).   Generally, no deduction is allowed for start-up

expenditures.   Sec. 195(a).

     Section 195(c)(1) defines “start-up expenditures” as:

          (1) * * * any amount--

                (A) paid or incurred in connection with--

                     (i) investigating the creation or
                acquisition of an active trade or business,
                or

                     (ii) creating an active trade or
                business, or

                     (iii) any activity engaged in for profit
                and for the production of income before the
                day on which the active trade or business
                begins, in anticipation of such activity
                becoming an active trade or business, and

               (B) which, if paid or incurred in connection
          with the operation of an existing active trade or
          business (in the same field as the trade or
          business referred to in subparagraph (A)), would
          be allowable as a deduction for the taxable year
          in which paid or incurred.

     As a general rule, the Commissioner’s determinations in the

notice of deficiency are presumed correct, and the burden of
                                 - 6 -

proving an error is on the taxpayer.     Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933).5

        Petitioners argue that our Memorandum Opinion in Vitale v.

Commissioner, T.C. Memo. 1999-131, affd. without published

opinion 217 F.3d 843 (4th Cir. 2000), sets a precedent for the

allowance of their research and travel expenditures in 2001, and

that it would be discrimination if their expenditures were

disallowed.    Approximately 2 years before he became eligible to

retire from his full-time job (1992), the taxpayer in Vitale

began writing with the hope of starting a second career as an

author.    In 1992, he wrote a book-length fictional manuscript and

a collection of short stories.    In 1993, the taxpayer wrote an

18,000-word draft of a third book, which he submitted for

copyright registration in June of that year.    In October 1993,

the taxpayer entered into a publication agreement for the third

book.    He also actively participated in the promotion of his

book.    During 1993, the taxpayer incurred costs conducting

interviews and performing research for the copyrighted book.     On

his 1993 Federal income tax return, the taxpayer for the first



     5
       Pursuant to sec. 7491(a), the burden of proof as to
factual issues may shift to the Commissioner where the taxpayer
introduces credible evidence and complies with substantiation
requirements, maintains records, and cooperates fully with
reasonable requests for witnesses, documents, and other
information. Because petitioners have failed to provide credible
evidence to support their claim, the burden of proof remains with
them.
                                 - 7 -

time treated his writing activity as an active trade or business.

Although the taxpayer had no gross receipts from his writing

activities in 1993 or 1994, the Court concluded that he had

engaged in the conduct of a trade or business in 1993 and allowed

some of his deductions.6   We believe that Mr. Deward’s activities

can be distinguished from those of the taxpayer in Vitale.

     At trial, petitioners introduced numerous documents in

support of Mr. Deward’s claimed expenses.    Mr. Deward’s testimony

at trial indicated that the transcript he presented to his local

chapter of the “Great War Society” in September 2006 was the

first material he had written with the intention of including it

in the book.   Mr. Deward conceded that those materials were

written in the summer of 2006.    He also testified that he

received no gross receipts from the trade or business of writing

books between 1997 and 2005.   Mr. Deward presented no evidence

establishing that he approached a publisher before receiving the

letter from Military History Press L.L.C. in August 2005.

     Evidence of written materials that could potentially be

included in a book and of communication with a publisher may

indicate that Mr. Deward is interested in writing and publishing

a book sometime in the future.    However, these events occurred



     6
       Some of the taxpayer’s deductions were disallowed for
reasons not relevant to the instant case. Vitale v.
Commissioner, T.C. Memo. 1999-131, affd. without published
opinion 217 F.3d 843 (4th Cir. 2000).
                                 - 8 -

more than 4 years after the taxable year in issue and cannot be

considered evidence of Mr. Deward’s being in the active trade or

business of an author in 2001.

     Respondent notes that unless petitioners show that Mr.

Deward was actively engaged in the business of being an author

for profit, his expenses will be disallowed under section 183.

However, respondent cites Goldman v. Commissioner, T.C. Memo.

1990-8, for the proposition that whether Mr. Deward had a profit

objective is of little relevance if he did no more than prepare

to begin the business of being an author.   In Goldman, the

taxpayer worked 15 to 20 hours per week in the process of making

a documentary film.   However, at the time of the trial, the

taxpayer estimated it would take another 1-1/2 to 2 years to

complete the film, which he could not sell until it was

completed.   For the year at issue in that case, the taxpayer had

reported a loss attributable to his filming activities.   This

Court held that even if the taxpayer were found to have the

requisite profit objective, we would sustain the Commissioner’s

contention that the taxpayer was “merely preparing to enter the

trade or business of producing and marketing films.”

     Mr. Deward’s situation is similar to that of the taxpayer in

Goldman.   Whether or not he had a profit motive, Mr. Deward has

failed to establish that he did anything more in 2001 than

research for the book that he intends to write about WWI.     The
                                 - 9 -

expenses related to researching a topic in order to write a book,

without more, are “start-up expenditures” within the meaning of

section 195.   Accordingly, we will sustain respondent’s

determination to disallow the miscellaneous deductions of $15,892

on Mr. Deward’s Schedule C relating to amortization and the

expenditures incurred for research for his book, including costs

for traveling to Europe.7   We will additionally sustain

respondent’s adjustment of petitioners’ medical expense

deductions and miscellaneous itemized deductions because of the

change in the determined amount of adjusted gross income.

     To reflect the foregoing,

                                              Decision will be entered

                                         under Rule 155.




     7
       Although we disallow the deductions in issue here, we note
that a taxpayer may elect to treat start-up expenditures as
deferred expenses, deductible pro rata over a period of at least
60 months, beginning with the month in which the active trade or
business begins. Sec. 195(b)(1). We need not decide here
whether Mr. Deward’s travel expenditures qualify for this
treatment.
