Ronald L. Heidrick - Page 14




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                    "The purpose of maintaining books and records is more             
               than to memorialize for tax purposes the existence of the              
               subject transactions; it is to facilitate a means of                   
               periodically determining profitability and analyzing                   
               expenses such that proper cost saving measures might be                
               implemented in a timely and efficient manner. * * *"                   
               [Citations omitted.]                                                   
          See also Steele v. Commissioner, T.C. Memo. 1983-63 (checks                 
          served as adequate substantiation for claimed expenses but were             
          not businesslike records).  This factor favors respondent.                  
               Preparation for the activity by extensive study of its                 
          accepted business, economic, and scientific practices or                    
          consultation with people who are expert in these practices may              
          indicate a profit objective where the taxpayer carries on the               
          activity in accordance with such practices.  Sec. 1.183-2(b)(2),            
          Income Tax Regs.                                                            
               Petitioner had personal experience that enabled him to                 
          conduct his gold mining activity.  He knew dredging from his                
          primary job as a deck engineer and hydraulic equipment operator.            
          He was a certified scuba diver.  He was skilled in the use of               
          dredging equipment.  He studied mining literature and attended a            
          few meetings with others interested in gold mining.  He gained              
          gold dredging experience from years of prospecting prior to 1994.           
               However, petitioner did not consult with experts in the                
          manner designed to establish how such an activity could be                  
          conducted profitably.  Petitioner’s gold mining efforts,                    






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