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Since 1994, petitioner has regularly produced photography
exhibitions each year. As a consequence, since 1995 JJT has
reported net profits each year. Petitioner has devoted a
significant amount of time to his Schedule C activity, is a
member of numerous professional photography associations, and has
exhibited his photography in numerous exhibits, winning numerous
awards and critical acclaim for his photographic works. Although
petitioner enjoys photography, we do not believe that he was
providing bookkeeping and photography services to PSI for
amusement, nor do we believe that personal gratification was
petitioner’s primary motivation for producing multiple
photography exhibitions each year.
On balance, we believe that the factors described above
outweigh other factors that admittedly suggest the absence of a
profit motive. Chief among these contrary factors is JJT’s long
history of losses during the 11 years preceding the years in
issue, when the only source of revenues for JJT was the billings
for its services to PSI--a factor given greater saliency by
petitioner’s family and personal ties to PSI.5 As previously
discussed, however, by 1993--the first year in issue--petitioner
5 Respondent has not explicitly argued that JJT’s dealings
with PSI were not at arm’s length. On brief, respondent alludes
to a “degree of suspicion” that PSI’s payments to petitioner were
merely gifts but seemingly overcomes this suspicion two sentences
later, stating: “It is not disputed that the Petitioner was
hired to perform accounting, computer, and ‘imaging’ services for
PSI.”
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