- 23 -
In this case, although petitioner devoted time and energy to
the affairs of Adult Living Centers, Whipple confirms that such
efforts of the taxpayer do not constitute a trade or business of
the taxpayer when there is no intention of developing the
corporation as a going business for sale in the ordinary course.
Although a taxpayer’s activities on behalf of the corporation in
which he owns stock may create income or gain, the income or gain
is more closely related to the successful operation of the
corporation’s business than that of the taxpayer. See id. A
taxpayer who actively engages in serving his own corporation for
the purpose of creating future income through the corporation is
not in a trade or business. See id. at 202.
Petitioner’s activities in this case are qualitatively
different from those of a taxpayer who develops and sells
businesses for profit. Developing and selling businesses for
profit is a trade or business. However, the separate trade or
business of promoting businesses “must be conducted for a fee or
commission or with the immediate purpose of selling the
corporations at a profit in the ordinary course of that
business.” Deely v. Commissioner, 73 T.C. 1081, 1093 (1980).
Buying and selling businesses for profit may constitute a trade
or business even though a promoter does not receive a fee,
commission, or other “noninvestor” compensation. The promoter,
however, “must show that the entities were organized with a view
Page: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: May 25, 2011