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the existence of a taxpayer’s profit objective are identified in
section 1.183-2(b), Income Tax Regs.: (1) the manner in which the
taxpayer carries on the activity; (2) the expertise of the
taxpayer or his advisers; (3) the time and effort expended by the
taxpayer in carrying on the activity; (4) the expectation that
assets used in the activity may appreciate in value; (5) the
success of the taxpayer in carrying on other similar or
dissimilar activities; (6) the taxpayer’s history of income or
losses with respect to the activity; (7) the amount of occasional
profits; (8) the financial status of the taxpayer; and (9) any
elements of personal pleasure or recreation.
2. Application to Petitioner
Both petitioner and Melissa testified that they entered into
an oral agreement to split any profits earned by Cool G Records
on a 50-50 basis. Melissa further testified that an agreement
with petitioner to divide any profits that Melissa might generate
as a performer has been in existence since Melissa was 10 years
old.
Petitioner testified that, pursuant to her understanding of
the oral agreement, any reimbursement of the approximately
$35,000 that she had spent to further Melissa’s career to date
would be derived solely from her 50 percent share of the profits
of Cool G Records. In response to a question from the Court,
petitioner testified that, once she had recovered her investment
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