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tear “of property used in the trade or business". The Supreme
Court has said that "to be engaged in a trade or business"
generally means that (1) there is an activity; (2) that is
carried on with continuity and regularity; and (3) the primary
purpose of such activity is income or profit. Commissioner v.
Groetzinger, 480 U.S. 23, 35 (1987); Hughes v. Commissioner, T.C.
Memo. 1995-202.
Mr. Ciaravella bears the burden of proving that Innovative
is a trade or business that supports his entitlement to deduct
business expenses. Rule 142(a); Welch v. Helvering, 290 U.S. 111
(1933). Applying the teaching of Groetzinger, Mr. Ciaravella has
the burden to show that he is engaged in the regular and
continuous activity of advertising through his sole
proprietorship, Innovative, with the primary motive of profit.
Innovative functioned essentially as a conduit. The record
in the present case lacks any reference to any actual activity
in which Innovative is engaged. Innovative's life has been
limited to a checkbook existence, functioning as a financial
intermediary. Although Mr. Ciaravella claims that Innovative was
created to handle the advertising for Dolphin so as to qualify
for trade discounts, there is no indication in the record that it
was doing so during the taxable years at issue. Trade
publications in which Dolphin would advertise would send invoices
to, and deal directly with, Dolphin, not Innovative. The only
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