- 8 -
tax years at issue, an indication that the activity was not
conducted with a profit objective. See Theisen v. Commissioner,
T.C. Memo. 1997-539. When questioned at trial about this fact,
she could not explain it. Petitioner did not seem to understand
that it suggests here that she was selling her products at or
near cost.
Petitioner's Mary Kay activity had a substantial component
of personal pleasure. See sec. 1.183-2(b)(9), Income Tax Regs.
Petitioner's customers appear to have been mostly family and
friends. She traveled, with her children and sometimes her
husband, as far as Pennsylvania, Florida, and Texas to conduct
her Mary Kay activity. As a result, she and her family were able
to see her parents, her sister, and other relatives and friends.
The expertise of the taxpayer or her advisers is a factor to
be considered. See sec. 1.183-2(b)(2), Income Tax Regs. There
is no evidence in the record of petitioner's prior experience
operating her own business. Petitioner has provided no evidence
that, before she commenced her Mary Kay activity in 1996, she
sought to consult someone who could have provided an objective
opinion on the advantages and disadvantages of conducting a Mary
Kay distributorship.
There could have been no expectation that the assets
petitioner used in the Mary Kay activity would appreciate in
value. See sec. 1.183-2(b)(4), Income Tax Regs. Although
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011