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equipment and spend most of the next 3 years learning how to use
the new equipment. His gross receipts plummeted; his losses
increased even more. Supra tables 5 and 6.
The parties have stipulated that petitioner did not have a
written business plan, forecasting income, expenses, and net
profit or loss, during the years in issue, and had not prepared
any such written business plan before starting his videotape
activity. When asked about this at trial, petitioner responded
as follows:
Q [Ms. DeCaro] Why did you not prepare a business
plan?
A [Petitioner] Well, I have my business plan in my head
and that’s one of my businesses that I was doing when I was
actually consulting was preparing business plans, and it
seemed like a silly waste of paper to put it down in black
and white.
Petitioner did not present us with an oral description of the
business plan that was in his head.
Petitioner noted at trial that his father had continued to
operate his own business until dying at age 92. When questioned
on cross-examination, petitioner did not give any indication as
to how long he thought it would take for him to earn enough
income from his videotape activity to recoup the $155,000 or so
that he had spent on equipment.
The parties have stipulated that petitioner did not spend
any money on advertising from 1993 through 1995; he relied solely
on “word-of-mouth”. Petitioner’s Schedules C also show that he
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