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Petitioner stated at trial that selling articles did not pay
well, and he offered no indication as to how much he could
receive from the sale of an article. Petitioner testified that
the sale of a novel would pay well, but no amount was offered nor
has he had a contract with a literary agent since he started the
activity. Petitioner did not explain how he expected to recoup
the $57,156 in losses.
Petitioner argues that he did have a profit objective since
he submitted articles only to periodicals that offered
compensation. However, petitioner’s articles were not accepted
for publication for a number of years (at least since 1978), and
it does not appear that petitioner attempted to develop a
strategy to get published or made changes in order to succeed.
Petitioner did submit his two novels to two literary agents
prior to the years at issue. Petitioner did not enter into any
contracts with the agents. It is not clear from the record
whether petitioner submitted any novels to agents during the
years at issue.
2. Expertise of Petitioner and His Advisers
Preparation for an activity by extensive study or
consultation with experts may indicate a profit objective where
the taxpayer conducts the activity in accordance with such study
or advice. See sec. 1.183-2(b)(2), Income Tax Regs.
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Last modified: May 25, 2011