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1095. When engaged in business promotion, the taxpayer receives
income directly for the services provided to the corporation
rather than indirectly through the corporation’s success.
Whipple v. Commissioner, supra at 203. Whether the taxpayer is
engaged in a trade or business is a question of fact. United
States v. Generes, 405 U.S. 93, 103 (1972).
Petitioner contends that he was in the trade or business of
buying and rehabilitating financially troubled business entities
and then selling them for profit and that he made the advances to
BEI and TELCOR in the ordinary course of that trade or business.
Petitioner testified that his intention was to sell the BEI
subsidiaries once they became profitable. However, petitioner
was contradicted by BEI's officers who testified at trial. Two
officers identified resale of the subsidiaries as only one
possible option and did not view the quick sale of the
subsidiaries as BEI's purpose. The officers also considered it
to be desirable for BEI to operate the subsidiaries after they
became successful. The bylaws of BEI did not specify that the
corporate purpose was to acquire struggling companies and
rehabilitate them for a quick sale at a profit.
The BEI subsidiaries do not themselves provide tangible
evidence that petitioner indirectly held the subsidiaries as his
inventory rather than as investments. None of those unprofitable
subsidiary companies improved, and there is no evidence that
petitioner intended and/or attempted to sell them. BEI's actions
with regard to Kaufman Lumber are inconsistent with the professed
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