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history of income or losses with respect to the activity; (7) the
amount of occasional profits, if any, that are earned from the
activity; (8) the financial status of the taxpayer; and
(9) whether elements of personal pleasure or recreation are
involved in the activity. Sec. 1.183-2(b), Income Tax Regs.
The maintenance of complete and accurate books and records,
and other indications that petitioner conducted his recording
activity in a businesslike manner, would indicate that petitioner
may have engaged in the activity for profit. See sec. 1.183-
2(b)(1), Income Tax Regs. Petitioner did not, however, carry on
his recording activity in a businesslike manner. Petitioner did
not keep regular records of expenses and has presented to the
Court only a few receipts for studio time in the latter part of
1987 and early 1988, 8 years before the year in issue. There is
no evidence that his expenditure of $20,462 was an ordinary and
necessary business expenditure for a profit-seeking recording
artist in a similar situation. See Dickie v. Commissioner, T.C.
Memo. 1999-138.
A taxpayer’s substantial investment of time and effort in
carrying on an activity, especially if the activity does not have
many personal or recreational aspects, may indicate that the
taxpayer has a profit objective. See sec. 1.183-2(b)(3), Income
Tax Regs. Even if a taxpayer devotes little time and effort to
the activity, a profit objective may be indicated by his
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Last modified: November 10, 2007