Walter C Demattia and Elizabeth J. Crouse - Page 13

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          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            





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