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B. Application of the Factors
1. The Manner in Which the Taxpayer Carried On the
Activity
We begin by examining the manner in which petitioner carried
on the drag racing activity. The fact that a taxpayer carries on
the activity in a businesslike manner may indicate a profit
objective. Sec. 1.183-2(b)(1), Income Tax Regs. In determining
whether a taxpayer conducted an activity in a businesslike
manner, we consider whether the taxpayer maintained complete and
accurate books and records, whether the activity was conducted in
a manner substantially similar to those of comparable businesses
that are profitable, and whether changes were attempted in an
effort to earn a profit. Engdahl v. Commissioner, 72 T.C. 659,
666-667 (1979); sec. 1.183-2(b)(1), Income Tax Regs.
Petitioner conducted the drag racing activity in a
businesslike manner during the years at issue. Petitioner kept a
separate checking account for the drag racing activity, out of
which he paid his expenses and into which he deposited his
earnings. Petitioner also prepared budget forecasts and expense
estimates for each of the years at issue and modified these
projections throughout the year as circumstances changed.
Petitioner had a specific, concrete business plan to profit
from drag racing, the details of which he explained to the Court
in his testimony. Cf. Spear v. Commissioner, T.C. Memo. 1994-354
(taxpayer alluded in testimony to a plan to realize profit but
did not provide details). Petitioner’s business plan called for
him to obtain substantial sponsorships, to enter NHRA-sanctioned
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