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we do not accept the changes in petitioners' 1993 amended return,
by submitting that amended return, petitioners and Mr. Grenville-
Jones concede that petitioners' original return for that year is
in error. We are unable to find on the instant record that Mr.
Grenville-Jones had the expertise10 and knowledge of the relevant
10 To illustrate Mr. Grenville-Jones' lack of expertise with
respect to the preparation of petitioners' 1993 return, Mr.
Grenville-Jones testified that he interpreted Publication 334,
which he used to prepare petitioners' 1993 Schedule C, to mean
that "you have a 2 years from 5 test, which means for 2 years you
can run a loss and you can presume that loss to be a valid
deduction unchallenged by the IRS, unless IRS shows it is not
valid, which means, if they challenge that profit motivation,
they have the burden of proof to challenge on the second year
while you're not making a profit." He further stated: "So I
refer to the IRS publication [334], and it's the second year of
operation, therefore, that tells me he [petitioner] can file with
certainty he will not be challenged at audit." However,
Publication 334 states the following:
Presumption of Profit
An activity is presumed carried on for profit if it
produced a profit in at least 3 of the last 5 tax years
including the current year. * * * You have a profit
when the gross income from an activity is more than the
deductions for it.
* * * * * * *
If your business or investment activity passes
this 3- * * * years-of-profit test, presume it is
carried on for profit. * * * You can take all your
business deductions from the activity, even for the
years that you have a loss. You can rely on this
presumption in every case, unless the IRS shows it is
not valid.
Publication 334 does not state, as Mr. Grenville-Jones testified,
(continued...)
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