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The rule 135 certificate and required documentation, books
and records, arm’s length rates charged to charter customers,
extensive advertising, and the changes petitioners implemented
all indicate that petitioners operated the jet charter activity
in a businesslike manner and support petitioners’ contention that
they carried on the jet charter activity for profit.
2. The Expertise of the Taxpayers or Their Advisers
We next consider petitioners’ expertise (or the expertise of
their advisers) in jet charter activities. Preparing for the
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.
When petitioners began the jet charter activity, petitioners
initially retained an outside management firm to manage the jet
charter activity for the first 6 to 8 months until Mr. Rabinowitz
had some experience in the business and could do it himself.
Petitioners also hired several trained staff members to work for
the jet charter activity throughout the time they were engaged in
the activity, including a captain, a co-captain, a mechanic, and
two bookkeepers. Mr. Rabinowitz also took pains to ensure his
decisions were educated decisions about the jet charter activity.
For example, he personally solicited owners of other aircraft as
charter customers because he had learned from the industry that
these were often the best charter customers.
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