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1.183-2(b)(1), Income Tax Regs. Changes in operating methods,
adoption of new techniques, or abandonment of unprofitable
methods in a manner consistent with an intent to improve
profitability may also indicate a profit motive. Id.
Petitioners contend that Mr. Abbene operated Blue Ribbon in
a businesslike manner because he: (1) Hired a certified public
accountant to maintain Blue Ribbon's books and records, (2)
maintained a separate bank account for Blue Ribbon's
expenditures, (3) advertised Blue Ribbon's services, and (4)
devoted a great deal of time to the business. Respondent argues
that these facts merely reveal the trappings of a for-profit
business and are outweighed by other facts indicating that Mr.
Abbene operated Blue Ribbon in a nonbusinesslike manner.
Respondent contends that Mr. Abbene failed to operate Blue Ribbon
in a businesslike manner because he failed to prepare or maintain
any type of formal business plans, budgets, operating statements,
or analyses of Blue Ribbon's records to determine how to make
Blue Ribbon a profitable enterprise. Respondent further contends
that Mr. Abbene's failure to implement any changes to the manner
in which he operated Blue Ribbon in order to improve its
profitability is evidence that he lacked the requisite profit
motive.
We agree with respondent. While the activity had some of
the "trappings" of a business, those trappings are insufficient
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