Darryl F. Royster - Page 14




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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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