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In McManus v. Commissioner, T.C. Memo. 1987-457, affd.
without published opinion 865 F.2d 255 (4th Cir. 1988), the Court
set forth three criteria that 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.
For purposes of clarity, the Court separately analyzes each
of petitioners' three activities to determine which, if any, of
these activities constituted a trade or business for purposes of
section 162.
With respect to the first activity, petitioners' ownership
and holding of a Florida condominium for sale or lease,
petitioners purchased the Florida condominium in January 1991 at
a foreclosure sale. Although petitioner admitted that he had
neither sold nor rented the Florida condominium in 1991, he
demonstrated that he had made a clear effort to sell or rent the
condominium by placing several advertisements in a newspaper
during 1991 offering the condominium for sale or lease. The
Court is satisfied that petitioner intended to make a profit in
this activity.
The Court, however, is not satisfied that the second
criterion set forth in McManus v. Commissioner, supra, has been
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