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Commissioner, T.C. Memo. 1997-168; Ellis v. Commissioner, T.C.
Memo. 1984-50; sec. 1.183-2(b)(1), Income Tax Regs.
Mr. Sears admitted that he “had some pretty weak business
practices”. Indeed, there is no indication he prepared a budget
or instituted an accounting system to track revenue and expenses.
Nor does it appear that he maintained a separate bank account or
credit card for the activity.8 Mr. Sears also reflected poor
recordkeeping practices by failing to timely file at least two
Forms 941, including one that was filed more than 2 years late,
and by deducting employee benefit programs expense for costs paid
before Ms. McCabe was covered by the reimbursement plan.
Furthermore, his failure to reimburse Ms. McCabe for medical
expenses indicates he viewed his family’s funds and those of the
activity as interchangeable.
Mr. Sears did apply for a business license from the City of
Oroville under the name “American Tax Savers” and registered the
Internet domain name “americantaxsavers.com”, although he never
established an Internet Web site for the activity. Mr. Sears
also had a written business plan. However, the business plan
consisted of a 25-page, preprinted package from RTP and a 1-page
document titled “Explanation of profit potential” signed by Mr.
8 Petitioners maintained at least two credit cards,
including a “Quicken Visa Business Card” in both of their names.
However, it is not clear from either the account statements or
the remainder of the record whether either credit card was used
exclusively for the activity.
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Last modified: May 25, 2011