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conclusion that Granot Loma was used in an activity engaged in
for profit.
While it is certainly true that LFI maintained books and
records of its activities, the record is devoid of any credible
evidence that the books and records were used to make informed
business decisions regarding the operation of a business at
Granot Loma. See Golanty v. Commissioner, 72 T.C. 411, 430
(1979) (holding that a taxpayer’s books and records should enable
the taxpayer to cut expenses, increase profits, and evaluate the
overall performance of the operation), affd. without published
opinion 647 F.2d 170 (9th Cir. 1981). LFI did not engage in any
market studies or meaningful research regarding the likelihood of
operating Granot Loma as a commercial lodge for profit. It did
not set the per capita charges billed to petitioner’s other
companies by analyzing what was necessary to turn a profit or
even by analyzing LFI’s total operating costs. As best we can
ascertain from the record, LFI made no meaningful effort to
evaluate the cost efficiency of capital expenditures or to cut
the costs of “operating” the lodge.
Neither petitioner nor any of his principal advisers had any
material experience operating a hotel, motel, or other
commercially viable lodging establishment. Some of petitioner’s
equipment and system suppliers had commercial experience but only
insofar as the design and use of such equipment and systems were
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