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fees paid or incurred for executives, consultants, and
for similar professional services. [H. Rept. 96-1278,
at 10-11 (1980), 1980-2 C.B. 709, 712; see also S.
Rept. 96-1036, at 11-12 (1980) (containing identical
language).]
This Court has identified three elements typically
indicative of the existence of a trade or business. McManus v.
Commissioner, T.C. Memo. 1987-457, affd. without published
opinion 865 F.2d 255 (4th Cir. 1988). The taxpayer must: (1)
Undertake an activity intending to make a profit; (2) be
regularly and actively involved in the activity; and (3) actually
have commenced business operations. Id. As regards the third,
temporal element emphasizing whether a particular trade or
business has begun its operations, the following oft-quoted test
offers guidance:
even though a taxpayer has made a firm decision to
enter into business and over a considerable period of
time spent money in preparation for entering that
business, he still has not “engaged in carrying on any
trade or business” within the intendment of section
162(a) until such time as the business has begun to
function as a going concern and performed those
activities for which it was organized. * * * [Richmond
Television Corp. v. United States, 345 F.2d 901, 907
(4th Cir. 1965), vacated and remanded on other grounds
382 U.S. 68 (1965).]
See also Jackson v. Commissioner, 864 F.2d 1521, 1525-1526 (10th
Cir. 1989), affg. 86 T.C. 492 (1986); Johnsen v. Commissioner,
794 F.2d 1157, 1160-1161 (6th Cir. 1986), revg. and remanding on
other grounds 83 T.C. 103 (1984); McKelvey v. Commissioner, T.C.
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