MEMORANDUM FINDINGS OF FACT AND OPINION
TANNENWALD, Judge: Respondent determined the following deficiencies in petitioner's Federal income tax:
| | Additions to tax |
| Year | Deficiency | Sec. 6651(a) 1 | Sec. 6653(a) |
| 1972 | $76.00 | $19.00 | $3.80 |
| 1976 | 421.42 | 105.36 | 21.07 |
| 1977 | 327.00 | 81.75 | 16.35 |
| 1978 | 413.00 | 103.25 | 20.65 |
| 1979 | 255.00 | 63.75 | 12.75 |
Petitioner has conceded that he received income in the amounts determined by respondent. 2 We must determine whether petitioner is entitled to deduct certain claimed business expenses, whether petitioner's failure to file income tax returns during the years in issue was due to reasonable cause, and whether petitioner is liable for additions to tax for negligence or intentional disregard of rules and regulations within the meaning of section 6653(a).
FINDINGS OF FACT
Some of the facts have been stipulated and are found accordingly. Petitioner resided in Florida when he filed his petition herein.
No individual Federal income tax return was filed by petitioner for any year between 1972 and 1979, inclusive. Partnership income tax returns were filed by Western Metal Products Company (Western Metal) for 1977 through 1979.
Western Metal was established in 1941. Petitioner has had a continuing interest in Western Metal since its founding. 3
During the 1940's and from 1954 to 1956, Western Metal apparently conducted manufacturing operations. At all other times, and perhaps even during the time Western Metal was involved in manufacturing, Western Metal conducted atomic energy research. There is no indication in the record that anyone other than petitioner conducted any of this research for Western Metal. Since petitioner was the sole participant in Western Metal's nuclear research activities, we shall sometimes refer to Western Metal's actions as petitioner's.
In 1951, according to petitioner, Western Metal conducted an experiment which resulted in nuclear fusion. However, petitioner did not "discover" that nuclear fusion had occurred until 10 years later, when he was doing further research. This experiment was repeated by Western Metal, according to petitioner, in 1971. 4 Petitioner believes that the world was initially created by this nuclear fusion process. Over the years, petitioner has made numerous attempts to inform scientists and government officials of Western Metal's miraculous "discovery," which he asserted has never been duplicated by anyone else. Some of petitioner's correspondents have expressed polite interest in petitioner's project; others have evaluated petitioner's claims and found them of "no merit."
Neither petitioner nor Western Metal has ever received any income, let alone a profit, from this nuclear fusion process. In 1978, Western Metal established a book value for its process of $50,000,000. On the 1977 through 1979 partnership tax returns, petitioner listed net operating losses of $100,000, $10,000,000, and $5,000,000, respectively. These losses were described as due to "write-off of capitalized research work." Petitioner apparently concluded that this write-off was justified because government officials were ignoring him and his "discovery." 5
Petitioner submitted lists of expenditures which respondent concedes were made by petitioner for the purposes indicated, but not that they were expended for business purposes. The amounts spent during the years in issue are as follows: 1972 -- $1,273.08 plus $519 (office in home); 1976 -- $1,324.40 plus $906 (office in home); 1977 -- $794.31 plus $911 (office in home) plus $272.33 (moving expense); 1978 -- $900.42 plus $720 (office in home); 1979 -- $1,039.19 plus $720 (office in home). 6
OPINION
Petitioner is faced with a multitude of obstacles to overcome before we can find the expenses at issue herein deductible. Although there are numerous grounds upon which most or all of these expenses can be denied, we will discuss only one such ground.
The deductibility of these expenses under section 162 (trade or business expenses), section 165 (losses incurred in a trade or business or in a transaction entered into for profit), or section 212(1) and (2) (expenses incurred in the production of income) turns on whether Western Metal's research activity was carried on with a bona fide profit objective. 7Dreicer v. Commissioner,78 T.C. 642 (1982), affd. in an unpublished opinion (D.C. Cir., Feb. 22, 1983); Bessenyey v. Commissioner,45 T.C. 261, 273-274 (1965), affd. 379 F.2d 252 (2d Cir. 1967). A taxpayer's declaration of a profit motive is not controlling; profit objective must be determined by a careful analysis of all the facts and circumstances, and those facts and circumstances are entitled to greater weight than a taxpayer's mere statement of intent. Dreicer v. Commissioner,supra at 645. The burden of proof on this issue rests with petitioner. Rule 142(a).
The regulations under section 183 list the following nine relevant factors which should normally be taken into account in determining whether an activity is engaged in for profit: (1) The manner in which the taxpayer carries on the activity; (2) the expertise of the taxpayer or his advisers; (3) the time and effort expended by the taxpayer in carrying on the activity; (4) expectation that assets used in activity may appreciate in value; (5) the success of the taxpayer in carrying on other similar or dissimilar activities; (6) the taxpayer's history of income or losses with respect to the activity; (7) the amount of occasional profits, if any, which are earned; (8) the financial status of the taxpayer; (9) elements of personal pleasure or recreation. Section 1.183-2(b), Income Tax Regs. Without specifically addressing each factor in the regulations, the following summary of the facts reveals that petitioner has not carried his burden of proving a profit objective.
Although petitioner allegedly first produced nuclear fusion in 1951, he did not become "aware" of his "discovery" for ten years. Petitioner has neither described nor proved the manner in which he carries on his research, his expertise, or the amount of time and effort expended by him in carrying on the activity. Petitioner merely contends that he has performed this experiment twice, that he studies nuclear research a great deal, and that he has made numerous efforts to convince others, including high-ranking government officials and prominent scientists, of the success of his experiment, although no one has shown any great interest. Western Metal's "process" by which nuclear fusion allegedly occurs has never been patented. Petitioner has never, so far as we know, made a nickel as an inventor; Western Metal has never earned any income from petitioner's "discovery." Petitioner has been supported by his parents and by trusts established by them; the income received from these sources, in conjunction with whatever other assets petitioner owns, has apparently been sufficient to sustain petitioner without forcing him to seek gainful employment. Finally, petitioner seems to find religious significance in his discovery, i.e., that nuclear fusion somehow pertains to the creation of the universe. 8
On this record, we cannot accept petitioner's contention that he or Western Metal had a bona fide profit objective during the period 1972 through 1979. By the beginning of that period, it was clear that the scientific community was not interested in the "discovery," even though enormous sums were being spent annually by public and private concerns on nuclear research. Surely, by that time, the "discovery" would have generated at least some, if not substantial, income if it had been of any monetary value whatsoever. Petitioner's contention that research firms invest lots of time and money in projects that do not generate income simply misses the point. Western Metal's sole activity was promoting a "discovery" that time had shown would never be profitable. In light of the scientific community's lack of interest, it must have been clear to petitioner, at least by the years in issue, that the "discovery" would never generate any income, let alone a profit, for him or Western Metal. Consequently, the expenses incurred by petitioner or Western Metal during the years in issue were not incurred by a taxpayer operating with a profit objective.Cf. White v. Commissioner,23 T.C. 90 (1954), affd. per curiam 227 F.2d 779 (6th Cir. 1955). Compare Avery v. Commissioner,47 B.T.A. 538 (1942); section 1.183-2(c), Example 6, Income Tax Regs. They are therefore not deductible under section 162 or section 165 or section 212(1) and (2).Such being the case, since the activities of petitioner and Western Metal generated no income during the years in issue, none of the expenses incurred by him and/or Western Metal are deductible under section 183(b).
Petitioner also has the burden of proving that his failure to file income tax returns during the years in issue was due to reasonable cause (section 6651(a)) and that he did not negligently or intentionally disregard rules and regulations within the meaning of section 6653(a). Rule 142(a). As petitioner has not addressed either of these two issues, he has failed to carry his burden of proof relating thereto and respondent's determination with respect to the additions to tax is sustained.
Decision will be entered for the respondent.