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Commissioner, 94 T.C. 685, 689 (1990); DeVenney v. Commissioner,
85 T.C. 927, 930 (1985). The fact that respondent eventually
loses or concedes the case does not establish an unreasonable
position. Sokol v. Commissioner, 92 T.C. 760, 767 (1989).
In this case, respondent disallowed petitioners' Schedule C
deductions for their mail order activity. Petitioners started
the mail order activity in 1992. Thereafter, petitioners
reported 6 consecutive years of losses on their Schedules C.
The information petitioners initially provided to the
revenue agent showed that petitioners ran one advertising
campaign per year in the first 4 years and none in the next 2
years, that petitioners spent 10 to 15 hours per week on the
activity, and that they had never modified their original
business plan. Based on this limited information, respondent
concluded that the mail order activity was not entered into for
profit under section 183.
Petitioners provided the same limited information to the
Appeals officer. Because petitioners did not provide any
additional information, the Appeals Division issued the statutory
notice of deficiency. The notice of deficiency stated that
petitioners had not established that the activity was entered
into for profit, that the claimed Schedule C expenses were
ordinary and necessary as required under section 162, or that the
expenses were not personal in nature.
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