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Over 6 to 8 months in 1992, while the stock car was being
built, Tony spent approximately 100 to 300 hours on his stock car
activity. During the same period, he worked full-time for CRC,
never missing a day of work. In 1992, construction of the stock
car was completed. Tony garaged the car at his house. Although
he spoke with some potential drivers, none signed a contract to
drive the stock car for him.
To make a profit from his stock car activity, Tony needed to
obtain large sponsors. He could not rely on prize winnings to
make a profit, because drivers take a significant portion of any
prize winnings. In 1992, Tony was able to obtain no more than
$5,571 in sponsorships. After other sponsorships failed to
materialize, Tony decided to sell the stock car, without ever
having raced it. Tony advertised the stock car for sale in trade
magazines.
Hoping that a good showing in a race would make the stock
car more attractive to a purchaser, in the fall of 1992 Tony
entered it in a race at a Madison, North Carolina, speedway.
While the stock car was being driven around the speedway between
qualifying runs for the race, it collided with another race car
and was destroyed. Tony’s stock car was uninsured, and he did
not replace it.
Petitioners spent over $100,000 on the stock car activity.
Tony had no business plan for his stock car activity, nor did he
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