T hi s di s pos i t i on i s notappr opr i a t e f orpubl i c a t i on and i s notpr e c e de nt * e xc e pta s pr ovi de d byN i nth C i r c ui tR ul e 36- 3.

T he pa ne l una ni m ous l yc onc l ude s thi s c a s e i s s ui t abl e f orde c i s i on ** w ith o u t o r a l a r g u m e n t. See F ed. R . A pp . P . 34 (a )( 2). NOT F OR P UB L I CAT I ON UN I TE D STATE S C OU RT OF APPE ALS FOR T HE NI NTH CI RC UI T S I VA T HA R AN NA T KU NA NA T HA N, P e titio n e r- A p p e lla n t, v. C OMMI S S I ON E R OF I NT E RNA L RE VENU E, R es po nd ent- A pp el l ee . N o. 10- 72151 T a x C t . N o. 17291- 07 ME MOR AN DU M *

A ppe a l f r om aD e c i s i on of

the U ni t ed S t at es T ax C ou rt S ubm i tt e d J une 26, 2012 ** B efo re: S C H R O E D E R , H A W K IN S , an dG O U L D , C i rcu i tJu d g es. S i va tha r a n N a tkuna na tha n appe a l s pr o s e f r om the T a x C ourt ’ s de c i s i on, af ter a b en ch trial, u p h o ld in g th e C o m m issio n ero f I n tern al R ev en u e’s det erm i nat i on of an i ncom e t ax defi ci encyand a l at e- fi l i ng addi t i on t o t ax for t ax 

# FI LED JU L 12 2012 M OLLY C. DW Y ER, CLERK U . S. C O U R T OF APPE ALS10- 72151 2 y e a r2003. W e ha ve j ur i s di c t i on unde r26 U . S . C . § 7482( a ) ( 1) . W e r e vi e w de no vo the T ax C ou rt ’ s l egal concl usi on s and for c l ear e rr or i t s f ac tual d e te rm in a tio n s . Kelleyv. C om m ’r , 4 5 F. 3 d3 4 8 , 3 5 0 ( 9 th Ci r . 1 9 9 5 ) . W e a f f i rm. T h e T ax C o u rtp ro p erl y d et erm i n edth atN atku n an ath an fai l edt o est ab l i sh hi s e nt i t l em entt o a part i al excl usi on of the gai ns he re ce i ved from se l l i ng Int el C o rp o r a tio n s to c k . See 26 U . S . C . § 1202( a ) ( 1) ( pe rm i tt i ng e xc l us i on of 50% of ga i ns f r om s a l e of

qua l i f i e d s m a l l bus i ne s s s t oc k, pr ovi de d tha tt a xpa y e rhe l d the s to c kf o rm o r e th a n f

iv e y e a r s ) . T he T a x C ourtdi d notc l e a r l ye rri n de t e rm i ni ng tha tN a tkuna na tha n w a s not e nt i t l e d t o c l a i m e d de duc t i ons f orpa y m e nt s f

ors of tw a r e de ve l opm e nttha the n e v e rr e c e iv e d . See Spa rk m an v. C om m ’r , 509 F . 3d 1149, 1159 ( 9th C i r . 2007) (tax p ay erb ea rs b u rd en o f s h o w in g rig h t t o claim ed d ed u ctio n , an dT ax C o u rt’s f a c tu a l d e te rm in a tio n th a t ta x p a y e rh a s f a ile dto p r o d u c e s u f

f ic ie n t e v id e n c e to subst ant i at e deduct i on m ustbe up hel d u nl es s i tconst i tut es cl ear e rr or); U ni ted States v. P acheco , 91 2 F . 2d 29 7, 30 4 (9th C i r. 19 90 ) ( t axpaye r c anno tdedu ctbad d e b tu n d e r2 6 U . S. C. § 1 6 6 i f i ta r i s e s f

r o m u n p a i dw a g e s , f

e e s , a n ds i mi l a ri t e ms o f ta x ab le in c o m e n o t r e p o rte da s in c o m e o n ar e tu rn ) ; M arks v. C om m ’r , 390 F . 2d 59 8, 59 9 (9th C i r. 19 68 ) ( dedu ct i bl e busi ness l osse s und er26 U . S . C . § 1 65 re qu i re l oss of e xi st i ng capi t al and d o n oti ncl ud e the fa i l ure t o rea l i ze ant i ci pat ed i ncom e) .10- 72151 3 T he T ax C ou rtdi d n otcl earl y e rri n d et erm i ni ng thatN atku nanathan fai l ed t o p ro d u ce su ffi ci en tev i d en ce t o d em o n strat e h i s en t i t l em en tt o cl ai m edb u si n ess d e d u c tio n s f

o rm e a ls a n de n te rta in m e n t, a d v e rtis in g , a n dh o m e o f f ic e e x p e n s e s . See 2 6 U . S . C . § 1 6 2 (a) (p erm i tt i n g d ed u ct i o n o f cert ai n “ o rd i n ary an dn ecessary” b u s in e s s e x p e n s e s ) ; i d. a t§ 274( d) ( s e tt i ng f orth s ubs t a nt i a t i on r e qui r e m e nt s f or c la im e dd e d u c tio n s f

o re n te rta in m e n t e x p e n s e s ) ; id . a t § 2 8 0 A ( c ) ( 1 ) ( s e ttin g f o rth l i m i t ed bu si ness use e xcept i on s t o g ener al proh i bi t i on on dedu ct i on s w i th res pect to ta x p a y e r ’s r e s id e n c e ) ; Sparkm an , 5 0 9 F .3 da t 1 1 5 9 ; Me r i di an W ood P r ods . C o. v. U ni ted States , 725 F . 2d 1183, 1188 ( 9th C i r . 1984) ( abs e nts ubs t a nt i a t i on of da t e , pl a c e , a m ount , bus i ne s s purpos e , a nd bus i ne s s r e l a t i ons hi p, e nt e rt a i nm e nt e x p e n s e d e d u c tio n s a r e d is a llo w e d ) . N atku nanathan’ s r em ai ni ng cont ent i on s are un pers uasi ve. N atku nanathan’ s “ ex part e app l i ca t i on for order s ea l i ng for pri vacy pr ot e c t i on, ” f

i l e d on J ul y8, 2011, i s de ni e d. AF F I RME D.