John R. and Edith M. Garbini - Page 7

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          about 1985.  Petitioners moved into the house in approximately              
          1987, and have resided there through the time of trial.  In 1986,           
          petitioners sold a mobile home park for $7 million.                         
               In applying the factors to determine profit objective, we              
          first consider the manner in which the taxpayer carries on the              
          activity.  “The fact that the taxpayer carries on the activity in           
          a businesslike manner and maintains complete and accurate books             
          and records may indicate that the activity is engaged in for                
          profit.”  Sec. 1.183-2(b)(1), Income Tax Regs.  Petitioners did             
          not maintain books and records.  Rather, petitioner made a                  
          monthly list of expense categories and, based on his canceled               
          checks, recorded the amounts expended for each category.  At                
          trial, petitioner submitted various invoices, canceled checks,              
          and the monthly lists for the taxable years in issue.  Petitioner           
          did not have a business plan to make money from the ranch.                  
          Petitioner did not keep the type of records which could be used             
          to increase the profitability of a business.  Petitioner never              
          prepared budgets or market projections which would outline                  
          strategies for ensuring a profitable business venture and making            
          informed business decisions on a periodic basis.  Such lack of              
          information upon which to make educated business decisions tends            
          to belie a taxpayer’s contentions that an activity was pursued              
          with the primary objective of making a profit.  Dodge v.                    
          Commissioner, T.C. Memo. 1998-89, affd. without published opinion           

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