CASE BRIEF

CASE BRIEF - CASE BRIEF CITATION Donald C. Kimbrough v....

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CASE BRIEF CITATION Donald C. Kimbrough v. Comm. 55 TCM 730 (1988) FACTS: During 1978-1982 Donald C. Kimbrough, the petitioner, deducted golf expenses as a business expense. Living in Chicago, IL the petitioner taught at Chicago Vocational High School. In 1972 he began playing golf seriously and joined his college’s golf team. In 1985, he was elected a member of the PGA. At this point he considered leaving his teaching job but decided he found it rewarding and felt his success as a black professional golfer would be an inspiration to his students. He practiced daily 12 hrs in the summer and 1 ½ hrs in the winter. He also went to Florida twice a month in winter to play golf. He virtually documented all of his golf expenses. ISSUES: 1. Are golfing activity expenses considered an activity not engaged in for profit (activity that is neither a trade or business for purposes of section 162 nor for the production of income for purposes of sec 212(1) or (2)) within the meaning of section 183? HOLDING: Court ruled that a taxpayer who incurred expenses that were appropriate and reasonable in amount with respect to golfing activities was entitled to business expense deductions because the golfing activities were engaged in for profit. In making its determination, the Court examined six factors: (1) businesslike manner in which the activity was carried on, (2) level of expertise, (3) time and effort devoted to golf, (4) history of losses, (5) outside income, and (6) pleasure derived from golf. ANALYSIS: The Courts sole issue for determination was whether the petitioner’s golfing activity was an “activity not engaged in for profit” within the meaning of section 183. The petitioner must prove that he had an honest and actual objective of making a profit. Profit meaning an economic profit independent of tax savings. The petitioner testified that his golfing activity was profit- motivated and that he entered golf tournaments in an attempt to win the prize money. The Court found the petitioner’s testimony credible, but gave greater weight to objective factors than to his statement of intent in determining whether he had the requisite profit objective. The nine factors are: (1) the manner in which the taxpayer carries on the activity; (2) the expertise of the taxpayer or his advisors; (3) the time and effort expended by the taxpayer in carrying on the activity; (4) the expectation that assets used in the activity may appreciate in value; (5) the success of the taxpayer in carrying on other similar or dissimilar activities; (6) the taxpayer's history of income or losses with respect to the activity; (7) the amount of occasional profits, if any, which are earned; (8) the financial status of the taxpayer; and (9) whether elements of personal pleasure or recreation are involved. No single factor is controlling, but rather it is an evaluation of all the facts and circumstances, taken as a whole, which is determinative. In reviewing the factors the Court considered the following facts.
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CASE BRIEF - CASE BRIEF CITATION Donald C. Kimbrough v....

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