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petitioner's business expense deductions are automobile and
travel, and meals and entertainment expenses of over $10,000 for
1996 and 1997 and over $7,000 for 1998.
The parties agree that petitioner did not assess the
profitability of her Mary Kay activity and did not analyze any
records to determine whether she could improve her Mary Kay
profitability.
Respondent determined that petitioner did not conduct her
Mary Kay activity with the honest objective to make a profit and
that if she did so conduct her activity, she has failed to
substantiate some of her business expenses for 1996 and has
failed to substantiate any of her business expenses for 1997 and
1998.
Discussion
Because petitioner failed to meet the requirements of
section 7491(a)(2), the burden of proof does not shift to
respondent in this case.1
Section 183(a) generally provides that if an activity
engaged in by an individual is not entered into for profit, no
deduction attributable to the activity shall be allowed, except
1Sec. 7491 is effective with respect to court proceedings
arising in connection with examinations by the Commissioner
commencing after July 22, 1998, the date of its enactment by the
Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. 105-206, sec. 3001(a), 112 Stat. 726.
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