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business license, liability insurance, or a bank account for Safe
Cycle. Petitioner did not “do any kind of financial analysis”,
nor did he prepare a budget for the motorcycle activity. He
“just shoestringed it.” Respondent disallowed the claimed
deductions.
Petitioner’s 2002 tax return was prepared by “My Tax Man,
Inc.”, which was organized and operated by Daniel Gleason. Mr.
Gleason was subsequently enjoined from promoting, marketing, or
selling fraudulent tax schemes by a Federal District Court.
Petitioner had discovered Mr. Gleason through an advertisment.
Discussion
A. Business Activity
Section 162(a) allows a deduction for ordinary and necessary
expenses paid or incurred in carrying on a trade or business.
Petitioner claims to be in the trade or business of providing
motorcycle lessons, and we are, therefore, faced with the initial
question whether he is in a trade or business within the meaning
of section 162. In Commissioner v. Groetzinger, 480 U.S. 23, 35
(1987), the Supreme Court held that “if one’s * * * activity is
pursued full time, in good faith, and with regularity, to the
production of income for a livelihood, and is not a mere hobby,
it is a trade or business”.
Furthermore, generally, under section 183(a) and (b) an
individual is not allowed deductions attributable to an activity
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