- 11 -
any trade or business". The inquiry as to whether a taxpayer is
carrying on a trade or business is dependent on the facts and
circumstances of each case. Commissioner v. Groetzinger, 480
U.S. 23, 36 (1987).
As indicated in McManus v. Commissioner, T.C. Memo. 1987-
457, affd. without published opinion 865 F.2d 255 (4th Cir.
1988), three criteria are generally accepted as indicative of
carrying on a trade or business. First, the taxpayer must
undertake an activity intending to make a profit. Second, the
taxpayer must be regularly and actively involved in the activity.
Third, the taxpayer's business operations must actually have
commenced.
In the present case, although petitioner did not present any
documentary evidence to show that he could realistically make a
profit in conducting his real estate development and marketing
activity, the Court is satisfied that petitioner did intend to
make a profit in the activity. Petitioner has met his burden of
proving that the first criterion set forth in McManus v.
Commissioner, supra, has been met. The Court, however, is not
satisfied that the second and third criteria set forth in McManus
have been met with respect to petitioner's real estate
development and marketing activity. While petitioner purchased
property, obtained building permits, designed floor plans with
the help of builders and engineers, and listed the property for
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011