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i. Manner in Which the Activity Is Conducted
The fact that a taxpayer carries on an activity in a
businesslike manner and maintains complete and accurate records
on the activity may indicate that the activity is engaged in for
profit. Sec. 1.183-2(b)(1), Income Tax Regs. A change in
operating procedures, adoption of new techniques, or the
abandonment of unprofitable methods may also indicate a profit
motive. Id.
Petitioners argue that this factor weighs in their favor.
We disagree. PMSI neither carried on the fishing activity in a
businesslike manner nor maintained complete and accurate records
for the activity. PMSI never set forth a statement of corporate
purpose as to the fishing activity in, for example, its articles
of incorporation, by-laws, or board minutes. Nor did PMSI ever
prepare a business plan, budget, balance sheet, income
projection, or other financial statement. We also are unable to
find that petitioners kept a separate set of books and records on
the fishing activity. Petitioners did keep invoices, receipts,
canceled checks, and a ledger on and for the activity.
Petitioners, however, never used those records or the data
reflected therein to evaluate or improve the fishing activity’s
financial performance.7 Burger v. Commissioner, 809 F.2d 355,
7 In this regard, petitioners are unable to state with any
specificity the costs which they incurred in each tournament and
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