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activity by extensive study of its accepted business, economic
and scientific practices and consulting with experts in these
matters may indicate that a taxpayer has a profit objective when
the taxpayer follows that advice. Sec. 1.183-2(b)(2), Income Tax
Regs.
There is no question that petitioner has significant
expertise in drag racing. Petitioner has been involved in drag
racing since 1969 and began winning rounds of competition in
1991. Petitioner is a skilled mechanic and was able to perform
most of the required work on his car himself. Petitioner studied
the performances of his car and his opponents’ cars (and kept
records of these performances) to determine the ideal
characteristics for his car. Petitioner also often consulted
with competitors to learn about their tactics and strategies.
Petitioner also has considerable business knowledge. He was
the senior vice president and chief financial officer of the bank
during the years at issue. While pursuing his degree in business
administration, petitioner took courses in marketing and
mathematics. These skills proved valuable to petitioner in
creating business plans and budget forecasts and doing the
necessary marketing to obtain a sponsor.
Petitioner has demonstrated that he has significant
knowledge and expertise both in drag racing itself and in the
business world. Petitioner has also shown that he consulted
others to further his knowledge and improve his prospects of
success.
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