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Petitioner kept records of income and expenses from his
marketing activities, and he kept records of the success rates of
his mailings and the size of his customer base.
A change of operating methods or abandonment of unprofitable
methods in a manner consistent with an intent to improve
profitability may indicate a profit objective. Krebs v.
Commissioner, T.C. Memo. 1992-154; Pirnia v. Commissioner, T.C.
Memo. 1989-627; sec. 1.183-2(b)(1), Income Tax Regs. Beginning
late in 1996, petitioner made numerous changes in his direct
marketing activity in an attempt to make a profit. Petitioner
searched for different companies for which to sell, and he
changed his methods when they were not successful. He obtained
sales positions with other direct marketing companies after he
became dissatisfied with being a Cell Tech representative. He
stopped sending unsolicited Cell Tech mailings after concluding
they were ineffective as a sales technique and began to use
telephone calls and meetings to make sales. He briefly became a
Telecard Network Co. representative in 1996 and 1997 but stopped
when he concluded that the Telecard Network Co. would not produce
the profits he sought. In 1997, he became a TPN representative
and concentrated his efforts on selling TPN and its products.
This factor favors petitioner.
Respondent contends that petitioner lacked any expertise in
direct marketing. We disagree. Efforts at gaining experience
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