Floyd L. Garrett and Dorothy G. Garrett - Page 18

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               Mr. Garrett testified that prior to the sale in 1989, he               
          considered his muscle car collection activity to be a hobby.  On            
          brief, petitioners recognize that Mr. Garrett's activity will not           
          be considered a trade or business if he does not show that he               
          engaged in the activity with continuity and regularity and with             
          the primary purpose of earning income or profit.  Further, they             
          recognize that sporadic activity, a hobby, or an amusement                  
          diversion will not qualify as a business.                                   
               The evidence does not support Mr. Garrett's claim that his             
          activity shifted from a hobby to a trade or business during the             
          years in issue.  Mr. Garrett's method of acquiring and paying for           
          muscle cars by using corporate funds, which were then improperly            
          deducted, apparently remained the same.  There is no proof that             
          petitioners' record keeping (or lack thereof) changed and no                
          business activity with respect to the muscle cars was reported on           
          petitioners' income tax returns.  In fact, Mr. Garrett referred             
          to his muscle car collecting activities as a hobby as recently as           
          1991 in an interview for a local newspaper.  Therefore, we find             
          that Mr. Garrett's activities during the years in issue were                
          simply a continuation of Mr. Garrett's hobby and not a trade or             
               Even if Mr. Garrett hoped to establish a museum in the                 
          future, his purchase and refurbishment of muscle cars were, at              
          most, preparations for entry into the trade or business of                  
          operating a muscle car museum and not activities that constituted           

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