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and the $200 petitioner received for his work on the videotape
listed as item 5 in table 3. These are all of the videotapes
that petitioner sold in 1993.
In 1994, petitioner sold only one video for $20. This video
is item 1 in table 4.
In 1995, petitioner sold $180 of videos. As of the trial
date he had not yet collected the money from these sales. These
videos are not listed in tables 1 through 4, and the videos were
for a project that petitioner was working on.
Operation of Petitioner’s Activity
Petitioner did not formulate any written business plan or
make any substantive financial projections before starting his
videotape activity. He did not have any written business plan in
existence from 1993 through 1995, forecasting his videotape
activity’s income, expenses, or net profit or loss. Petitioner
did not maintain separate bank accounts for his personal funds
and the funds from his videotape activity.
Petitioner had incurred $155,553 of costs for videotape
equipment by the end of 1995, of which $74,977 was incurred from
1993 through 1995. Petitioner concedes that this equipment will
not appreciate in value.
Petitioner did not spend any money on advertising from 1993
through 1995. He relied solely on “word-of-mouth” to generate
sales of his videos from 1993 through 1995. Petitioner did not
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