Stephen F. Scofield and Nancy E. Scofield - Page 15

          Putoma Corp. v. Commissioner, 66 T.C. 652, 673 (1976), affd. 601            
          F.2d 734 (5th Cir. 1979); secs. 1.166-9(a), 1.166-5(b), Income              
          Tax Regs.  Whether the taxpayer is engaged in a trade or business           
          is a question of fact.  United States v. Generes, 405 U.S. 93,              
          104 (1972); sec. 1.166-5(b), Income Tax Regs.                               
               2.   Petitioner's Dominant Motive for Guaranteeing                     
                    Northeast's Line of Credit                                        
                    a.   Background and the Parties' Contentions                      
               Whether a guaranty is proximately related to the taxpayer's            
          trade or business depends on the taxpayer's dominant motive for             
          becoming a guarantor when he or she made the guaranty.  United              
          States v. Generes, supra at 104; Harsha v. United States, 590               
          F.2d 884, 886-887 (10th Cir. 1979).  When a guarantor of a                  
          corporate debt is a shareholder and employee of the corporation,            
          mixed motives for the guaranty are usually present; the critical            
          fact is which motive is dominant.  United States v. Generes,                
          supra at 100.  A motive is related to a trade or business when              
          the guarantor aims to increase or protect his or her salary from            
          the trade or business.  A motive is related to an investment when           
          the guarantor aims to increase or protect the value of his or her           
          stock in the debtor corporation.  Whipple v. Commissioner, 373              
          U.S. 193, 202 (1963).  Petitioner has the burden of proving that            
          his dominant motive in signing the guaranty was business related            
          rather than investment related.  United States v. Generes, supra            
          at 103; Estate of Mann v. United States, 731 F.2d 267, 273 n.8              
          (5th Cir. 1984); Miles Prod. Co. v. Commissioner, 457 F.2d 1150,            

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