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with running a profitable direct marketing business that might
assist Mrs. Smith in the operation of her activities.
In sum, we are not convinced that Mrs. Smith sought any
counsel from disinterested third parties on how she might make
her direct marketing activities profitable. Nor are we convinced
that Mrs. Smith tried to educate herself in any meaningful way on
the economics of operating a direct marketing business or to
overcome her lack of experience and expertise. This factor
favors respondent.
3. The Time and Effort Expended by the Taxpayer
The fact that a taxpayer devotes much of her personal time
and effort to carrying on an activity may indicate an objective
to derive a profit, particularly if the activity does not have
substantial personal or recreational aspects. Sec. 1.183-
2(b)(3), Income Tax Regs.
Mrs. Smith testified that she spent between 60 and 80 hours
each week working on her direct marketing activities.
Respondent, on the other hand, argues that the time Mrs. Smith
devoted to her marketing activities should be discounted because
much of the time was pleasurable, included socializing with
friends, and had the added benefit of allowing petitioners to
claim business expense deductions for many of their personal
expenses.
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