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his profitability. To begin with, petitioner stated that his
location “was one mile off Route 417 on a side road called
Sullivan Hollow, which pretty much meant that I wasn’t going to
get drive by business.” Petitioner testified that he “cut back
quite a bit on advertising” and reduced the price charged for the
rooms. Petitioner’s ads were attractive but did not display his
building, apparently because his bed and breakfast building would
not compare favorably with other bed and breakfast buildings
which were pictured in the other ads he offered into evidence.
We note that none of the changes made by petitioner, in essence
to reduce losses and control costs, had any material effect.
Petitioner continued to incur sizeable losses. Thus, we find
petitioner did not carry on the activity in a businesslike
manner. We conclude that this factor is not indicative of the
requisite profit objective.
We consider the expertise of the taxpayer. A taxpayer’s
expertise, research, and study of an activity, as well as his
consultation with experts, may be indicative of a profit
objective. Sec. 1.183-2(b)(2), Income Tax Regs. Prior to
operating the Camelot Inn, petitioner served as a chef in the
United States Army. Ms. Hughes worked during college as a
housekeeper and receptionist at a motel. Petitioner belonged to
the Cattaraugus County Tourism Bureau and the National Bed and
Breakfast Association. However, petitioner testified that he had
no prior experience operating a bed and breakfast. Prior to
starting the bed and breakfast, petitioner did not consult
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