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When the taxpayer conducts an activity in a manner
substantially similar to that of other activities of the same
manner which are profitable, a profit motive may be indicated.
Engdahl v. Commissioner, 72 T.C. 659, 666-667 (1979); sec. 1.183-
2(b)(1), Income Tax Regs. Petitioner presented no evidence about
how other basketball teams/skills schools are operated. He did
credibly testify, however, that directors of teams like RBS had
won lucrative job offers from major athletic shoe and clothing
companies.
Generally, when considering whether the taxpayer’s conduct
is similar to that of other profitable activities of the same
nature, the relevant factors for consideration include
advertising, maintaining a separate bank account, developing a
written business plan, and having a plausible strategy for
earning a profit. See Morley v. Commissioner, T.C. Memo. 1998-
312; Butler v. Commissioner, T.C. Memo. 1997-408.
Petitioner spent a total of $444 on advertising in the years
in issue, plus word-of-mouth advertising at local basketball
games. In addition, petitioner attached several newspaper
articles as exhibits which mention RBS. The Court has recognized
that both word-of-mouth and newspapers can constitute
advertising. Petitioner testified that word-of-mouth and news
stories were, in fact, the best ways that he could promote his
school.
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