- 19 - the taxpayer's mere statement of his or her intent. Dreicer v. Commissioner, 78 T.C. at 645; sec. 1.183-2(a), Income Tax Regs. After considering all the facts and circumstances in this case, it is our view that petitioners' operation of Red Caboose was an activity not engaged in for profit during the years in issue. Some of the more significant factors we have weighed are the manner in which petitioners carried on Red Caboose, Red Caboose's loss history, the time and effort expended by them in carrying on Red Caboose, their financial status, and their interest in model railroads as a recreational activity. That a taxpayer operates an activity in a businesslike manner and maintains complete and accurate books and records may indicate that the activity is engaged in for profit. Sec. 1.183- 2(b)(1), Income Tax Regs. Respondent contends that petitioners did not maintain adequate books and records for their model railroad activity. We agree. Petitioners commingled their records for Red Caboose with their personal records. For 1990 and 1991, they recorded Red Caboose's sales in their personal appointment book. During 1990, 1991, and 1992, they commingled the receipts for Red Caboose's expenses with their personal receipts. They could not have presented a complete set of records for Red Caboose, separate from their personal records, at any time during the years in issue. Furthermore, they conducted some of Red Caboose's bankingPage: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Next
Last modified: May 25, 2011