James R. and Myrtice L. Peacock - Page 10

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          tournaments because Ms. Peacock suffered a knee injury that                 
          caused her to decide to discontinue her participation.                      
               PMSI did not prepare a business plan for the fishing                   
          activity.  Petitioners kept and coded invoices, receipts,                   
          canceled checks, and a ledger which was given to their accountant           
          to prepare their and PMSI’s annual tax returns.  Neither                    
          petitioners nor PMSI had a balance sheet, income projection, or             
          other financial statement for the fishing activity until the end            
          of the taxable year, and they were not able to ascertain the                
          fishing activity’s financial status for a year until they                   
          received the tax returns reporting the activity for that year.              
          Petitioners studied the fishing activity from the point of view             
          of ascertaining the best way that they could catch the desired              
          fish.  They did not study the fishing activity from the point of            
          view of catching the fish at a cost that would be less than the             
          anticipated revenues which would be connected therewith.                    
               Petitioners’ net worth was at least $1 million in each of              
          the subject years.  They had income and cash receipts from                  
          activities other than PMSI as follows:                                      
               Source                    1995      1996     1997                      
               Interest income            $16,328   $12,828   $1,513                  
               Sale of stock                  271      -0-   300,000                  
               Interest in the dealership 171,198      -0-     -0-                    
               Interest in another entity  72,971    90,386  114,361                  
               Total                    260,768   103,214  415,874                    

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