Bernard Michael Reed - Page 7

          Cir. 1981).  The taxpayer's stated intention to make a profit is            
          not determinative; greater weight is given to objective factors             
          rather than the taxpayer's mere statement of intent.  Engdahl v.            
          Commissioner, 72 T.C. 659, 666 (1979).                                      
               Section 262 precludes a taxpayer from deducting personal,              
          living, or family expenses that are not incurred in the conduct             
          of a trade or business or for the production of income.                     
               Based upon the record in this case, we find that petitioner            
          lacked the requisite profit objective in carrying on his business           
          activities.  Petitioner claims to have operated a water purifier            
          franchise, yet he failed to produce any receipts for inventory              
          purchases, advertisement, or related records.  He was also unable           
          to sell any of the units; in fact, he testified at trial that he            
          eventually gave units away at no charge.                                    
               Petitioner operated NSA in a similarly offhand manner.                 
          While he presented a ledger at trial, it failed to differentiate            
          between personal and business expenses.  Furthermore, although              
          petitioner substantiated the expense of the real estate agent               
          examination and the payment to the State Industrial Insurance               
          System, he offers no evidence, such as business cards, a                    
          telephone listing, a client list, or documentation of previous              
          investments, that he was actively engaged in the real estate                
          business, or that he conducted the activity with a profit motive.           
               Petitioner contends that the only expenses he deducted were            
          ordinary and necessary to his business activities.  However, his            

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