- 7 -
(5) the success of the taxpayer in carrying on similar or
dissimilar activities; (6) the taxpayer’s history of income or
losses with respect to the activity; (7) the amount of occasional
profits, if any, which are earned; (8) the financial status of
the taxpayer; and (9) elements of personal pleasure or
recreation. No single factor is determinative. Sec. 1.183-2(b),
Income Tax Regs.
The following discussion applies the nine factors to Mrs.
Cooper’s horse barrel-racing activities:
Factor (1): Manner in Which the Taxpayer Carried On the
Activity
Mrs. Cooper did not carry on her horse barrel-racing
activities in a businesslike manner. See sec. 1.183-2(b)(1),
Income Tax Regs. She failed to charge fees for riding lessons
she gave, and she failed to follow through with membership
affiliations that could help her obtain financial sponsorship for
her activities. Mrs. Cooper also failed to keep detailed records
of her activities for 2001. She did not present any evidence
that she developed a profit plan before she began her horse
barrel-racing activities or that she evaluated her activities in
an attempt to make them profitable.
Factor (2): The Expertise of the Taxpayer or His Advisers
Preparation for an activity by extensive study or
consultation with experts may indicate a profit motive where the
taxpayer conducts the activity in accordance with such study or
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011