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races as a means of gaining exposure for his sponsor, and
otherwise to enter unsanctioned races where he had the best
chance of success and the opportunity to win larger prizes.
Petitioner was successful in making a profit as predicted in the
business plan during 1998. Petitioner was not able to earn a
profit as predicted in the business plan, however, during the
years at issue, largely because he had lost his sponsorship and
was unsuccessful in persuading other local businesses to sponsor
him.
When petitioner realized that he was not able to earn a
profit on the drag racing activity as predicted in his business
plan, he decided to liquidate his business and sell his race car.
See Engdahl v. Commissioner, supra at 667; Canale v.
Commissioner, T.C. Memo. 1989-619 (taxpayer’s decision to leave
racing because of its unprofitability supported claim of entering
racing with a profit objective). During the years at issue,
petitioner decreased the number of races he entered and testified
he entered them mainly to market his car. The separate checking
account, specific business plan, budget and expense forecasts,
and decision to modify the activity when it became unprofitable
support petitioner’s contention that he carried on the drag
racing activity in a businesslike manner during the years at
issue.
2. The Expertise of the Taxpayers or Their Advisers
We next consider petitioner’s expertise (or the expertise of
his advisers) in the drag racing activity. Preparing for the
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