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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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