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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
business.
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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