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hired art students as his employees. Petitioner kept a
spreadsheet of income and expenses; a cash receipts journal;
receipts for expenses; Forms ST-1, Sales and Use Tax Returns;
Forms W-2, Wage and Tax Statements; and a Certificate of
Registration to sell tangible property in Illinois. Although
petitioner’s artist activity had some of “the trappings of a
business”, such “trappings” are insufficient to demonstrate that
the activity was a business carried on for profit. Golanty v.
Commissioner, supra at 430. Petitioner’s maintenance of such
books and records may represent nothing more than a conscious
attention to detail. See id. Petitioner failed to show that the
books and records were kept for the purpose of cutting expenses,
increasing profits, and evaluating the overall performance of the
operation. He did not maintain a budget for the activity or make
any sort of financial projections. Petitioner has not persuaded
us that he conducted his artist activity in a businesslike
manner.
Where losses continue to be sustained beyond the period that
customarily is necessary to bring the operation to profitable
status, such continued losses, if not explainable, as due to
customary business risks or reverses, may be indicative that the
activity is not being engaged in for profit. See sec. 1.183-
2(b)(6), Income Tax Regs. A taxpayer’s failure to implement any
operating changes after continued losses may indicate the lack of
intent to make a profit. See Brodrick v. Derby, 236 F.2d 35, 38
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