- 13 -
him to recognize a profit on his investment. He also failed to
consult any attorneys or accountants regarding the sponsorship's
potential profitability. Third, and even though the absence of a
separate checking account and formal books and records does not
always indicate that an activity was conducted in an
unbusinesslike manner, see Engdahl v. Commissioner, 72 T.C. 659,
666 (1979), under the circumstances herein, we conclude that Dr.
DeMattia's record-keeping system was not maintained for the
purpose of tracking the business' profitability or conducting the
activity in a businesslike manner. Dr. DeMattia's crude record-
keeping system was not maintained for the purpose of cutting
expenses, increasing profits, and evaluating the overall
performance of the investment. See Glenn v. Commissioner, supra.
Dr. DeMattia kept no record of the prize money available for each
of the tournaments, the amount of money Constant won, or the
amount of money to which petitioners were entitled. Compare
Krause v. Commissioner, T.C. Memo. 1987-193 (taxpayers documented
their son's tournament play to include tour names, cities,
sponsoring club, and potential earnings). They did not maintain
a budget for the activity. Dr. DeMattia's only concern appears
to be the amounts which petitioners could deduct.
Furthermore, Dr. DeMattia's failure to make any changes in the
method of carrying on the activity in order to increase the
activity's potential profitability is also evidence of a lack of
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011