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established, through the years in issue, until 1999, petitioners
reported net losses totaling over $405,000 from that activity.
The activity did not generate a profit in any of those years.
In 1994 petitioners’ daughter was employed to some extent as
a model and actress. The income and expenses attributable to
petitioners’ daughter’s employment are reported on petitioners’
1994 return.
The examination of petitioners’ returns for the years in
issue began not later than October 23, 1997.4 In the notice of
deficiency that resulted from the examination of those years
respondent disallowed the loss attributable to Turtle Performance
claimed for each year because, according to respondent, the
activity was not engaged in for profit in any of those years.
For 1994, respondent also determined that petitioners improperly
included their daughter’s income and expenses on their return.
Respondent further determined that petitioners did not have
reasonable cause for failing to file a timely 1995 return.
Discussion
According to petitioners, Turtle performance is, and was at
all relevant times, a trade or business. Therefore, petitioners
argue, the expenses and/or losses incurred in that activity are
4 The provisions of sec. 7491 are therefore not applicable.
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Last modified: May 25, 2011