Raymond J. and Ilene H. Pavelko - Page 9

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          the mental health field.  The tapes were 23 minutes in length and           
          were about “living in the community with self-respect”.                     
          Petitioner “sold these both by mail and by going around to                  
          different mental health centers and different shows”.  These                
          videotapes were “available for $20 plus tax or by mail for $24              
          total”.  By 1999, petitioner realized that selling the videotapes           
          was not profitable, so he began a new activity involved in                  
          “developmental research” in the mental health field.  This                  
          activity involved research into the question “What is the                   
          immediate effect of using spiritual sayings and thoughts with               
          persons who have experienced a recent mental health crisis?”                
          Petitioner hopes to use the results of this research to open an             
          office and offer counseling services.                                       
               The following is the application of the section 183 factors            
          to petitioner’s mental health services and developmental research           
          Manner in Which the Taxpayer Carries On the Activity                        
               A profit objective may be indicated where the taxpayer                 
          operates the activity in a businesslike manner and keeps complete           
          and accurate books and records.  Sec. 1.183-2(b)(1), Income Tax             
          Regs.  A change of operating methods in a manner consistent with            
          an intent to improve profitability may also indicate a profit               
          objective.  Id.  There is no suggestion that petitioner kept                
          books and records of any type, or that petitioner otherwise                 

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