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characterized as a trade or business requires an examination of
the facts in each case. Commissioner v. Groetzinger, 480 U.S.
23, 36 (1987). There are three factors to consider: (1) The
taxpayer must undertake the activity with the intent to make a
profit; (2) the taxpayer must be regularly and actively involved
in the activity; and (3) the taxpayer’s business operations must
actually have commenced. McManus v. Commissioner, T.C. Memo.
1987-457, affd. per curiam without published opinion 865 F.2d 255
(4th Cir. 1988).
At trial, petitioner failed to establish that he was in a
trade or business. Petitioner had no books or records of a trade
or business. He had no current profits from a trade or business
and did not prove a history of such profits. Petitioner reported
no profits from the sales of stock, and he made no sales of real
estate during 1997 or the prior year. There is nothing in the
record to support his assertion except petitioner’s self-serving,
unbelievable statements. Tokarski v. Commissioner, 87 T.C. 74,
77 (1986). Because we find that petitioner was not in a trade or
business during the year in issue, we hold he is not allowed to
deduct any of the Schedule C expenses he claimed in 1997.
In addition to the prior holding, we find that petitioner
failed to substantiate his claimed deductions. A taxpayer must
keep sufficient records to establish the amounts of the
deductions. Meneguzzo v. Commissioner, 43 T.C. 824, 831 (1965);
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