                         T.C. Memo. 1997-480



                       UNITED STATES TAX COURT



    HARRY E. THOMASON AND ESTATE OF HATTIE D. THOMASON, DECEASED,
       MARY T. CRIST, PERSONAL REPRESENTATIVE, Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent


       Docket No. 8746-95.                    Filed October 22, 1997.


       John R. Foley, for petitioners.

       Leslie H. Finlow, for respondent.



                         MEMORANDUM OPINION


       COUVILLION, Special Trial Judge:    This case was heard
                                                                 1
pursuant to section 7443A(b)(3) and Rules 180, 181, and 182.

1
      Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the year at issue. All Rule
references are to the Tax Court Rules of Practice and Procedure.
After the petition was filed, petitioner Hattie D. Thomason died,
and her daughter, Mary T. Crist, personal representative of the
estate of Hattie D. Thomason, was substituted on behalf of the
                                                   (continued...)
                               - 2 -


     Respondent determined a deficiency of $5,331 in petitioners'

Federal income tax for 1991.

     The issues for decision are:    (1) Whether petitioners were

engaged in a trade or business activity within the intent and

meaning of section 162(a) and, (2) if petitioners were not

engaged in a trade or business activity under section 162(a),

whether some or all of the expenses claimed as trade or business

expenses are otherwise deductible under section 212(1) and (2) as

expenses paid or incurred for the production or collection of

income or for the management, conservation, or maintenance of

property held for the production of income.

     Some of the facts were stipulated, and those facts, with the

annexed exhibits are so found and are incorporated herein by

reference.   At the time the petition was filed, petitioners'

legal residence was Fort Washington, Maryland.

     Harry E. Thomason (petitioner) and Hattie D. Thomason (Mrs.

Thomason) were married in 1947, and, during the following year,

petitioner became employed as a patent examiner by the U.S.

Patent Office in Washington, D.C.    In 1949, petitioner and Mrs.

Thomason bought a parcel of real estate in Prince George's

County, Maryland, and began building several rental houses there

over a period of years.   The houses were built substantially by


1
 (...continued)
estate of the deceased petitioner.     Rule 63.
                                  - 3 -


petitioner and his family, with some of the bulldozing,

electrical wiring, and other similar work contracted out.      All of

the houses were built for rental.      Petitioner managed the rental

of all of the houses, three of which were owned by his children.

Petitioner's management activity included advertising, selecting

prospective tenants, and maintenance and improvement of the

houses.

        About the time some of the first rental houses were being

built, petitioner also began attending night classes to obtain a

law degree.     Sometime after receiving his law degree, petitioner

became a patent attorney.

        In 1957, petitioner left his position with the U.S. Patent

Office and subsequently became employed by the U.S. Army Material
                              2
Command in the patent area.       As a result of a "reduction in

force" petitioner's employment with that agency terminated in

1972.     Petitioner thereafter did not pursue salaried employment.

     From 1972 through 1991, the primary source of income for

petitioner and Mrs. Thomason was the rental of the houses in

Prince George's County, Maryland.      During 1991, at least 90

percent of petitioner's income was derived from the rental of

these houses.


2
     It is unclear from the record whether petitioner began his
duties at the U.S. Army Material Command as a patent attorney or
whether he began as a patent examiner and later became a patent
attorney.
                               - 4 -


     Petitioner is highly educated in the field of solar energy

and is a well-known authority in that field.   Petitioner is also

an accomplished inventor in the field of solar energy and has

acquired 36 patents in that area over a series of years.

Petitioner and his son have become extremely knowledgeable about

the generation of electricity by solar energy.   The two have

developed methods of heating water for household purposes through

the use of solar energy and also have developed a method of

heating and cooling a building using solar energy.

     In 1959, petitioner built a successful solar heated home

utilizing the solar heating system he developed bearing the

trademark name of "Solaris".   As petitioner refined his

inventions in the field of solar energy, he would build a new

house and incorporate therein the newer technology.    In 1962,

petitioner incorporated an entity known as Thomason Solar Homes,

Inc., through which he conducted the building, testing, and

patenting of solar energy equipment.

     Along with his research and inventions, petitioner actively

pursued the passage of the Solar Heating and Cooling

Demonstration Act of 1974, Pub. L. 93-409, 88 Stat. 1069

(codified as amended at 42 U.S.C. secs. 5501-5517 (1994)), which

provided, in part, for the development and demonstration of solar

heating and cooling systems for use in residential dwellings.

Petitioner has also been an organizer and an active member of the
                                 - 5 -


American Energy Association and the American Energy Society, both

of which are "citizens' action groups" whose purpose is to

locate, and pursue the prosecution of, violators of various

energy laws.

        Additionally, petitioner has conducted seminars in solar

energy over the years.     Some of these solar energy seminars were

conducted at George Washington University in Washington, D.C.

During 1991, petitioner made several speaking appearances on this

subject, including a keynote speech at the University of Dubuque,
        3
Iowa.

        Finally, during 1991, Thomason Enterprises was formed for

the stated purpose of acquiring rental real estate.     However,

Thomason Enterprises later became a part of Thomason Solar Homes,
    4
Inc.

        In January 1991, petitioner and Mrs. Thomason purchased a

condominium in Manatee County, Florida, at a public auction for

$1,950.     They subsequently began to advertise the condominium for

sale or rent in the Washington Post, a newspaper of daily

circulation in Washington, D.C.     Petitioner intended to make "a

3
     Petitioner's accomplishments in the field of solar energy
have been recognized by an article in the Reader's Digest, by
publications of the Department of the Treasury, the U.S. Customs
Service, and the Audubon Naturalist Society, and in a Mexico City
newspaper, the Washington Post, and the former Washington, D.C.,
Evening Star.
4
     The record does not reflect when or in what manner Thomason
Enterprises became a part of Thomason Solar Homes, Inc.
                               - 6 -


quick profit" by selling the condominium; however, in the event

it could not be sold quickly, it would be rented out in order to

realize a return.   Petitioner estimated the value of the

condominium at the time of purchase to be $22,000.     It was

advertised for a sale price of $31,500; however, no lease price

was set out in the advertisements.     One potential lessee was

quoted a rental fee of $375 per month, plus $58.10 for the

monthly condominium maintenance fee, plus utilities.     The record

is not clear whether the property was ever rented out.     The

record is clear, however, that it was not rented during 1991, nor

was the property ever sold.

     On their 1991 Federal income tax return, petitioners

reported on Schedule C, Profit or Loss from Business, income of

zero, and a net loss of $24,613 consisting of the following

expenses:


Advertising                                $ 1,035
Car and truck expenses                       1,035
Commissions and fees                         1,138
Insurance (other than health)                   56
Legal and professional services              5,540
Office expense                                 663
Repairs and maintenance                        497
Supplies                                     4,152
Taxes and licenses                           3,769
Travel, meals and entertainment
     Travel                                  3,232
     Meals and entertainment                 2,586
          (after the 20% limitation)
Utilities                                      910
  Total expenses                           $24,613
                                    - 7 -


The Schedule C filed with petitioners' 1991 return fails to state

the principal business or profession, the business name, and the

business address of petitioners' trade or business activity.

Petitioners reported the rental income and other expenses from

their rental houses in Prince George's County, Maryland, on

Schedule E, Supplemental Income and Loss, of their 1991 Federal

income tax return, which included a detailed statement of their

rental expenses, separately listing each category of expense and

identifying each amount separately as to each house for which the

expense was incurred.   Based on the testimony at trial, the

expenses incurred by petitioners for the Florida condominium were

claimed on Schedule C as trade or business expenses.

     In the notice of deficiency, respondent disallowed all of

the expenses claimed by petitioners on Schedule C of their 1991

return for the following reasons: (1) Petitioner and Mrs.

Thomason failed to establish that a valid business activity was

in existence during 1991; (2) expenses relative to the Florida

condominium were not deductible as a Schedule C activity;

(3) expenses relative to the corporation were deductible by the

corporation on a corporate return; and (4) expenses relative to

rental units were deductible on Schedule E and had "already been
                                5
considered" on that schedule.

5
     On Schedule E of their 1991 return, petitioners reported
gross rental income from 14 properties totaling $114,860, total
                                                   (continued...)
                               - 8 -


     At trial, respondent acknowledged that, as to Schedule C

expenses, petitioner could substantiate that he "spent $24,000"

in 1991, nevertheless, "[respondent had] no way of knowing to

where those expenses would be assigned", and "that seems to be

the crux of this case."   The Court construes this statement to

mean that, while respondent was satisfied that petitioners'

Schedule E correctly reflected the income and expenses for those

properties identified on Schedule E, respondent could not

determine whether any of the expenses claimed on Schedule C

related to any of the rental properties on Schedule E, and,

moreover, respondent was satisfied that petitioners were not

engaged in any trade or business activity and, therefore, were

not entitled to a deduction for any of the expenses claimed on

Schedule C.

     The only documentary evidence presented by petitioner to

substantiate the Schedule C expenses, and to support a

categorization thereof, was a stack of 143 canceled checks

written by petitioner in 1991, which he contends were paid in

connection with his various activities that year.   The submitted
                                       6
checks total approximately $30,000.

5
 (...continued)
expenses and depreciation of $58,739, and net rental income of
$56,121. Respondent made no adjustments to either the income or
expenses reported on Schedule E.
6
     This amount excludes approximately $1,500 worth of "voided"
                                                   (continued...)
                                 - 9 -


     Petitioner maintained at trial that he was engaged in a

trade or business during 1991.

    The determinations of the Commissioner in a notice of

deficiency are presumed correct, and the burden is on the

taxpayer to prove that the determinations are in error.     Rule

142(a); Welch v. Helvering, 290 U.S. 111 (1933).   Moreover,

deductions are a matter of legislative grace, and the taxpayer

bears the burden of proving that he or she is entitled to any

deduction claimed.   Rule 142(a); New Colonial Ice Co. v.

Helvering, 292 U.S. 435, 440 (1934); Welch v. Helvering, supra.

     The principal issue is whether petitioners were engaged in a

trade or business activity during 1991, and, if so, what was that

activity.   At trial, petitioner generally described several

activities as follows:


     Well, go back to the several businesses that we were
     trying to conduct at the time. One is the business of
     renting houses, one is the business of incorporation,
     one is the business of buying and selling property. To
     get a second opinion or a good opinion--shall we buy
     this piece of property or not? If we buy it, shall we
     build a house on it? If we build a house on it, how
     much do we set aside?

          And we actually * * * bought pieces of property
     and we built solar houses on them. So that was one of
     the things, and testing further new inventions.




6
 (...continued)
checks submitted by petitioner.
                                - 10 -


Another aspect of petitioner's activity related to two citizens'

activist groups he organized, and, as to which, some of the

expenses were claimed as trade or business expenses on

petitioners' 1991 income tax return.     In his testimony in

connection with a mailing list maintained for these activist

groups, petitioner testified:


     [We] hit them again and again and again for the
     American Energy Society and the American Energy
     Association. And with those two organizations--

          THE COURT: All right.     Now those organizations,
     were they corporations?

          THE WITNESS:   No, sir.   They were not
     incorporated.

          THE COURT: What would they do, these two
     organizations * * *

          THE WITNESS: One thing they did was form under
     that a citizens' action group. The purpose of the
     citizens' action group was in cases like finding a
     lawbreaker, which we did, and bringing a lawbreaker
     into court, as we did. And when the lawbreaker was
     found to be in defiance of court, then the court would
     order that the lawbreaker would pay us a fee. It was
     known as a private attorney general. So that was one
     of the things that we engaged in.

          THE COURT: So it was sort of like a whistle
     blowing-like thing?

          THE WITNESS:   You've got the popular phrase for
     it, sir.


Aside from the various rental properties petitioners owned and as

to which petitioners properly reported their income and expenses

on Schedule E of their 1991 return, the record supports a finding
                                   - 11 -


that petitioners were engaged in the following activities during

1991, which petitioner contends constituted a trade or business

activity for purposes of section 162(a):         (1) The ownership and

holding for sale or lease of a condominium in Manatee County,

Florida (Florida condominium activity); (2) "lawyering" (legal

activity); and (3) research, inventing and teaching in the field
                                             7
of solar energy (solar energy activity).         Respondent contends

that none of these activities rose to the level of a trade or

business within the meaning of section 162, and, therefore, none

of the expenses attributable thereto are deductible on Schedule

C.

     Section 162 allows a deduction for "Trade or Business

Expenses", which are "all the ordinary and necessary expenses

paid or incurred during the taxable year in carrying on any trade
                               8
or business".   Sec. 162(a).       The inquiry as to whether a

taxpayer is carrying on a trade or business is dependent on the

facts and circumstances of each case.       Commissioner v.

Groetzinger, 480 U.S. 23, 36 (1987).

7
     Petitioner asserted that he and Mrs. Thomason were engaged
in "a number of activities" to make a profit during 1991.
However, the Court is satisfied that the relevant deductions on
Schedule C of their return pertain to only the three activities
described.
8
     Cash basis taxpayers must establish: (1) That the expenses
were paid; (2) that they were paid during the year in issue;
(3) that they were paid in furtherance of a trade or business;
and (4) that they were ordinary and necessary expenses of the
trade or business. Sec. 1.162-1, Income Tax Regs.
                               - 12 -


     In McManus v. Commissioner, T.C. Memo. 1987-457, affd.

without published opinion 865 F.2d 255 (4th Cir. 1988), the Court

set forth three criteria that are generally accepted as

indicative of carrying on a trade or business.    First, the

taxpayer must undertake an activity intending to make a profit.

Second, the taxpayer must be regularly and actively involved in

the activity.    Third, the taxpayer's business operations must

actually have commenced.

     For purposes of clarity, the Court separately analyzes each

of petitioners' three activities to determine which, if any, of

these activities constituted a trade or business for purposes of

section 162.

     With respect to the first activity, petitioners' ownership

and holding of a Florida condominium for sale or lease,

petitioners purchased the Florida condominium in January 1991 at

a foreclosure sale.    Although petitioner admitted that he had

neither sold nor rented the Florida condominium in 1991, he

demonstrated that he had made a clear effort to sell or rent the

condominium by placing several advertisements in a newspaper

during 1991 offering the condominium for sale or lease.    The

Court is satisfied that petitioner intended to make a profit in

this activity.

     The Court, however, is not satisfied that the second

criterion set forth in McManus v. Commissioner, supra, has been
                               - 13 -


met with respect to this condominium activity.    Petitioner failed

to show the Florida condo activity was conducted on a regular and

continuous basis during 1991 or that he was engaged in the

business of buying and selling real estate.    McManus v.

Commissioner, supra.   The majority of the actions taken by

petitioner with respect to the Florida condominium were, at best,

occasional and intermittent.    The record indicates that, during

the year at issue, petitioner merely ran a series of

advertisements in the Washington Post offering the Florida

condominium for sale or lease.    Petitioner and Mrs. Thompson

visited the condominium only twice during 1991, once to purchase

the property and once to meet with a potential purchaser or

lessee of the property.   During their second visit, petitioner

and Mrs. Thomason stayed at the condominium and made minor

repairs to the condominium.    Petitioner testified that he and

Mrs. Thomason spent a total of approximately 120 hours per week

on their various activities.    However, no oral testimony or

documentary evidence was presented to show how much time they

actually spent on the Florida condo activity during 1991.

Furthermore, petitioner admitted that he and Mrs. Thomason spent

a majority of their time during 1991 on their rental real estate

activity (i.e., Maryland property).

     On this record, the Court holds that petitioner has failed

to establish that, during 1991, he was engaged in the trade or
                                - 14 -


business of buying and selling real estate, or that petitioner's

Florida condo activity was conducted on a regular and continuous

basis.   McManus v. Commissioner, supra.    Petitioner failed to

satisfy his burden of proving that the Florida condo activity

rose to the level of a trade or business within the meaning of

section 162.   Accordingly, petitioners are not entitled to

deduct, under section 162, any expenses incurred in connection

with the Florida condominium, which they claimed on Schedule C of

their 1991 return.    Respondent is sustained on this

determination.

     However, section 212 allows as a deduction all the ordinary

and necessary expenses paid during the year for the production or

collection of income, section 212(1), or for the management,

conservation, or maintenance of property "held for the production

of income", section 212(2).    Section 167(a)(2) allows as a

deduction a reasonable allowance for depreciation of property

"held for the production of income."     The phrase "held for the

production of income" has the same meaning in section 212 and

section 167.     Mitchell v. Commissioner, 47 T.C. 120, 129 (1966).

Expenses and depreciation may be deducted only if the property is

held for production of income during the taxable year at issue.

Meredith v. Commissioner, 65 T.C. 34, 41 (1975).     Section 1.212-

1(b), Income Tax Regs., provides:
                              - 15 -


     ordinary and necessary expenses paid or incurred in the
     management, conservation, or maintenance of a building
     devoted to rental purposes are deductible notwithstanding
     that there is actually no income therefrom in the taxable
     year, and regardless of the manner in which or the purpose
     for which the property in question was acquired. * * *


Furthermore, expenses paid or incurred in connection with

investment property may be deductible under this regulation,

"even though the property is not currently productive and there

is no likelihood that the property will be sold at a profit or

will otherwise be productive of income and even though the

property is held merely to minimize a loss with respect thereto."

Sec. 1.212-1(b), Income Tax Regs.   Whether property is held for

the production of income is a question of fact to be determined

from all the facts and circumstances.   Johnson v. Commissioner,

59 T.C. 791 (1973), affd. 495 F.2d 1079 (6th Cir. 1974).

     On this record, the Court is satisfied that petitioners held

the Florida condominium during 1991 "for the production of

income", within the meaning of section 212(1), and that some of

the expenses incurred with respect thereto during 1991 were for

"the management, conservation, or maintenance" of the Florida

condominium, as provided in section 212(2).   Petitioner and Mrs.

Thomason purchased the Florida condominium for the purpose of

making a profit on resale.   They intended to lease the Florida

condominium to derive income during the period in which they were

unable to sell the property, and they incurred expenses to
                             - 16 -


prepare and maintain the property for such use.   The Florida
                                                                  9
condominium was not used personally by petitioner and his wife.

They continuously advertised the property for sale or rent during

1991, and the reason that no income was produced by the property

during year in question was a lack of fruitful response to

petitioners' newspaper advertisements.   The record reflects that

the condominium was suitable for occupancy and available for sale

or rent during the year at issue.   The fact that the property

realized no income during the year at issue is not determinative.

     Having found that petitioners held the Florida condominium

for the production of income within the meaning of section 212,

it follows that their expenses for the management, conservation,

or maintenance of property, such as taxes, utilities, maintenance

fees, advertising, legal fees, and repairs are allowable for
     10
1991.     Respondent contends that expenses attributable to the

Florida condo activity were deducted by petitioners, and allowed,

on Schedule E of their 1991 return.   Therefore, respondent

contends, the expenses were not properly deductible on Schedule



9
     Although petitioner and Mrs. Thomason stayed at the Florida
condominium on one of their two visits during 1991, the Court
does not view this as a personal use because the sole
purpose of their visit was to meet with a prospective purchaser
or lessee and to make minor repairs.
10
     There is no evidence in the record that petitioner and his
wife claimed a deduction for depreciation on the Florida
condominium in 1991.
                              - 17 -


C, and no further allowances for deductions should be allowed on

Schedule E.

     Upon a review of the entire record, this Court is satisfied

that petitioners did not deduct, on Schedule E, expenses relative

to their Florida condo activity.   It is evident that petitioners

deducted these amounts on Schedule C, although it is unclear as

to exactly what amount of the Schedule C deductions is

attributable to the Florida condo activity.   The Court agrees

that the Florida condo activity expenses would be properly

deductible on Schedule E, rather than Schedule C, and that

petitioners are entitled to deductions for such expenses,

notwithstanding the erroneous categorization of these expenses on

their return.

     The Court must, therefore, determine the amount of

petitioners' expenses attributable to the Florida condo activity.

Petitioner asserts that the groups of canceled checks he

introduced at trial included checks for expenses paid in relation

to the Florida condo activity.   Petitioner's testimony at trial

with regard to these canceled checks was jumbled and evasive, at

best.   However, upon a detailed and exhaustive review of the

canceled checks, the Court is satisfied from the record that

petitioner did incur expenses in relation to the Florida condo

activity in 1991, and some of these expenses can be identified by

some of the checks.   Accordingly, the Court finds that petitioner
                                 - 18 -


and Mrs. Thomason incurred expenses of $3,592.66 in connection

with the Florida condo activity during 1991.      Those expenses are

allowed as Schedule E deductions.

     With respect to petitioner's travel expenses in relation to

the Florida condo activity, which specifically include vehicle

expenses, travel, and meals, section 274(d) overrides the so-
                     11
called Cohan rule.        Sanford v. Commissioner, 50 T.C. 823, 827

(1968), affd. per curiam 412 F.2d 201 (2d Cir. 1969); sec. 1.274-

5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6,

1985).   Under section 274(d), no deduction may be allowed for

expenses incurred for travel on the basis of any approximation or

the unsupported testimony of the taxpayer.      Section 274(d)

imposes stringent substantiation requirements to which each

taxpayer must strictly adhere.      Thus, that section specifically

proscribes deductions for travel expenses in the absence of

adequate records or sufficient evidence corroborating the

taxpayer's own statement.      Petitioners failed to present evidence

to meet the requirements of section 274(d) with respect to the

claimed deductions for vehicle expenses, travel, and meals



11
     As a general rule, if the record provides sufficient
evidence that the taxpayer has incurred a deductible expense, but
the taxpayer is unable to substantiate adequately the amount of
the deduction to which he or she is otherwise entitled, the Court
may, in some situations, estimate the amount of such expense and
allow a deduction to that extent. Cohan v. Commissioner, 39 F.2d
540, 543-544 (2d Cir. 1930).
                              - 19 -


relating to the Florida condominium.   Therefore, petitioners are

not allowed a deduction for these expenses.

     As noted above, the Court holds that petitioners are

entitled to deduct expenses attributable to the Florida condo

activity, under section 212, in the total amount of $3,592.66 for

1991.   Further, the Court holds that petitioners are entitled to

a deduction for depreciation, under section 167, in connection
                                            12
with the Florida condo activity for 1991.

     With respect to the activity petitioner engaged in, which he

referred to at trial as "lawyering", respondent contends that

petitioner's law practice in 1991 was limited to legal actions

taken with respect to his rental real estate activity, such as

the filing of lawsuits against tenants to recover unpaid rent or

to evict, and appearances in court on behalf of his children.

Respondent asserts further that petitioner had no paying clients

in 1991 and derived no income from a law practice that year.

     Petitioner's testimony on this subject was

characteristically vague and indicated that he was somewhat


12
     The appropriate amount of such depreciation deduction is
provided by statute, to be determined by the parties in a Rule
155 computation. Petitioners' basis has been established at
$1,950, and no evidence was adduced of any other capital
expenditures that would increase the basis for depreciation
purposes. The Court has made a finding that the Florida condo
constitutes residential rental property. Therefore, the
applicable depreciation method, recovery period, and convention
shall be determined in accordance with the finding under sec.
168.
                               - 20 -


confused about the nature and extent of his legal activities in

1991.   Petitioner occasionally appeared in court in connection

with his rental real estate activity, as well as with respect to

rental houses owned by his children (which he managed).

Oftentimes, petitioner was required to file lawsuits against his

tenants to recover delinquent rental payments or to evict a

tenant.   On this record, substantially all of petitioner's legal

activities during 1991 were in connection with his rental real

estate activity in Maryland.   Additionally, the canceled checks

submitted by petitioner showing payments of expenses he alleges

were "legal activity" expenses were claimed by petitioner on

Schedule E of the 1991 return (as part of his rental real estate
                                                     13
activity expenses) and were allowed by respondent.

     Petitioner failed to present any evidence, other than his

own fragmented and self-serving testimony, to show that he

performed any legal activities other than those performed in

connection with his rental real estate activity.   No evidence was

presented that would tend to show that petitioner was engaged in

the trade or business of a law practice in 1991, within the

meaning of section 162.   Moreover, petitioner presented no

evidence to show that he incurred expenses, carrying on legal

activities in 1991, in excess of the amounts allowed as

13
     This indicates to the Court that petitioner, himself,
considered his "legal activities" in 1991 to be a part of his
rental real estate activity.
                                 - 21 -


deductions by respondent on Schedule E.      Moreover, some of the

checks introduced into evidence by petitioner were payments to an

attorney for legal services to petitioner.      Petitioner,

therefore, was not engaged in the practice of law during 1991.

     With respect to petitioner's solar activity, there is no

question that petitioner was actively engaged in this activity

for several years and that the activity rose to the level of a

trade or business for purposes of section 162(a).      The question,

however, is whether this activity was conducted by petitioner

individually or whether the activity was engaged in by a

corporation.

     In 1962 petitioner incorporated Thomason Solar Homes, Inc.

(Thomason Solar), for the purpose of conducting all of his solar

energy research and invention activities.      Respondent contends

that the expenses attributable to petitioner's solar energy

activity in 1991 are properly deductible on the corporate return

of Thomason Solar, rather than on petitioner's individual return.

Thomason Solar was still in existence throughout 1991 and the

corporation filed a Form 1120, U.S. Corporation Income Tax
                         14
Return, for that year.        Thomason Solar reported income of

$13.79 and deductions of $2,714.85 for 1991.

14
     Petitioner testified that he had filed documents to dissolve
Thomason Solar sometime during 1991 or 1992. However, he later
admitted that the Maryland Department of Taxation and Assessment
records reflect that Thomason Solar was "forfeited" on Oct. 3,
1994, for failure to file a corporate tax return.
                               - 22 -


     Petitioner's testimony was highly ambiguous with respect to

both the activities of Thomason Solar and the existence of his

own individual solar energy activities, if any, in 1991.

Additionally, petitioner was wholly unresponsive to respondent's

request for him to enlighten the Court as to his methods for

differentiating between his corporate and noncorporate

activities.   The types of expenses that petitioner asserts are

attributable to his solar energy activity in 1991 (i.e., canceled

checks) fit within the parameters of the meagerly described

purpose and activities of Thomason Solar.

     Petitioner has failed to satisfy his burden of proving that

he, individually, carried on any solar energy activities in 1991

in addition to or separate from those activities conducted

through Thomason Solar.    He further failed to prove that any of

the expenses he alleges are attributable to his solar energy

activity in 1991 were not properly deductible on the corporate

return of Thomason Solar.

     On this record, the Court is satisfied that the expenses

petitioner alleges are attributable to his solar energy activity

in 1991 would have been properly deductible on the corporate

return of Thomason Solar, rather than on petitioners' individual

return for 1991.   Consequently, the Court holds that petitioners,

as individuals, were not engaged in a solar activity as a trade

or business during 1991.
                              - 23 -


     In summation, petitioners were not engaged in a trade or

business activity within the intent and meaning of section

162(a).   Respondent is sustained on this issue.   However,

petitioners are entitled to a depreciation deduction and

additional deductions of $3,592.66 as Schedule E deductions,

under section 212(1) and (2), relating to their Florida

condominium.

                                         Decision will be entered

                                    under Rule 155.
