- 10 -
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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Last modified: May 25, 2011