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expended by the taxpayer in carrying on the activity; (4) the
expectation that the assets used in the activity may appreciate
in value; (5) the success of the taxpayer in carrying on other
similar or dissimilar activities; (6) the taxpayer’s history of
income or loss with respect to the activity; (7) the amount of
occasional profits, if any, which are earned; (8) the financial
status of the taxpayer; and (9) elements of personal pleasure or
recreation. Id. No single factor controls, other factors may be
considered, and the mere fact that the number of factors
indicating the lack of a profit objective exceeds the number
indicating the presence of a profit objective (or vice versa) is
not conclusive. Id.
Application of the Factors
1. Manner in Which the Taxpayer Carries On the Activity
A profit objective may be indicated where the taxpayer
operates the activity in a businesslike manner and keeps complete
and accurate books and records. Sec. 1.183-2(b)(1), Income Tax
Regs. Petitioners’ Amway activities were not conducted in a
sufficiently businesslike manner. Petitioners did not maintain
their own business records other than notes of meetings in a
daily planner. Petitioners did not present evidence of any
formal budgets, profit projections, or break-even analyses which
had been prepared in connection with their distributorship.
Although certain reports were provided to petitioners by Amway
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Last modified: May 25, 2011