James R. and Myrtice L. Peacock - Page 20

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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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