                    T.C. Summary Opinion 2002-140



                       UNITED STATES TAX COURT



    ANTHONY J. CARINO, JR. AND JILL V. CARINO, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3683-00S.               Filed October 29, 2002.


     Anthony J. Carino, Jr. and Jill V. Carino, pro sese.

     Russell F. Kurdys and Edward F. Peduzzi, Jr., for

respondent.



     RUWE, Judge:   This case was heard pursuant to the provisions

of section 74631 of the Internal Revenue Code.      The decision to

be entered is not reviewable by any other court, and this opinion

should not be cited as authority.   Respondent determined a

deficiency of $10,216 in petitioners’ Federal income tax for the


     1
      All section references are to the Internal Revenue Code as
amended.
                                - 2 -

taxable year 1996.   The issue for decision is whether petitioners

are entitled to deductions for expenses incurred by Mr. Carino in

connection with his daughter’s dancing activities.

                            Background

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.   At the time of filing the

petition, petitioners resided in Leechburg, Pennsylvania.   Mr.

Carino is an attorney licensed to practice law in the

Commonwealth of Pennsylvania.   He has established a profitable

personal injury litigation practice.2    Mrs. Carino is a school

teacher.

     As part of Mr. Carino’s continuing legal education

requirements as an attorney, he took courses in the area of

sports and entertainment law, and he has acquired publications,

books, and treatises on that subject.    Mr. Carino claims to have

represented an aspiring country music singer and claims that he

is in the process of negotiating a salary arrangement and

contract with a professional football prospect.   Mr. Carino has

earned no income with respect to these individuals, and




     2
      Mr. Carino reported a net profit from his legal profession
of $177,422 in 1993, $93,421 in 1994, $197,938 in 1995, $244,216
in 1996, $82,964 in 1997, and $358,870 in 1999.
                               - 3 -

he has no contractual or other arrangement in place for the

provision of any future management services by him.

     Petitioners’ daughter, Heather Carino, is a dancer.     She was

born on November 4, 1982, and in 1996 was 14 years old.    Her

dancing activities began at the age of 2 when her mother enrolled

her at a local dance studio.   She began dancing competitively at

the age of 4, and she won numerous competitions by the age of 7.

Heather’s honors include third runner-up and talent winner in the

Miss Preteen America competition, Junior Miss Dance for Dance

Masters of America, Teen Miss Dance for Dance Educators of

America, Senior Miss Dance for Dance Educators of America, and a

gold medal winner at the VII Certamen Internationale de Ballet

competition held in Panama City, Panama.   Heather was the

recipient of the Julliard School scholarship in New York, the

Shirley Jones scholarship at the Pittsburgh Playhouse, the

American Ballet Theater scholarship award, as well as

scholarships to the Broadway Dance Center in New York and the

Edge School of Performing Arts in Hollywood, California.     She has

studied dance extensively at the Julliard School, the American

Ballet Theater, the Pittsburgh Ballet Theater, the Atlanta Ballet

Theater, and the American Tap Dance Orchestra, where she has

danced with Gregory Hines, Savion Glover, and Buster Brown.3




     3
      Petitioners’ daughter appeared on the cover of the August
2000, edition of Dance Spirit, and she authored an article
entitled “What I Learned At Competition”.
                                 - 4 -

     In 1994, Heather auditioned for and was selected by

Theatrical Presentations International, Inc. (TPI), to be a Fan

Fest Kid at Major League Baseball’s All-Star festivities in

Pittsburgh.    She performed in a musical-type show for 2 weeks and

at the All-Star Game during the seventh-inning stretch.    She

received no compensation for these performances.

     Mr. Carino got to know, and had dealings with, TPI and its

executive vice president, Mindy Dow.     He testified that Ms. Dow

encouraged him to enter into a management contract with his

daughter and showed him several examples of management contracts.

     Mr. Carino and his daughter executed a document entitled

“Personal Management Agreement”, dated December 31, 1994, which

stated a 3-year term with three separate options to renew for

additional periods of 3 years.    That document stated that Mr.

Carino was to act as his daughter’s sole personal manager and was

to provide services normally performed by such a person.    The

document then states:

     5.   A.       As compensation for services to be rendered
                   hereunder, Artist shall pay Manager, as and
                   when received by or on behalf of Artist a
                   sums [sic] of money equal to:

                   i.      Ten percent (10%) of Artist’s
                           “gross earnings”, up to and
                           including earnings in the amount of
                           Five Thousand Dollars ($5,000.00)
                           per week, as defined herein;

                   ii.     Fifteen percent (15%) of Artist’s
                           “gross earnings”, in excess of Five
                           Thousand dollars ($5,000.00), but
                                 - 5 -

                            less than Ten Thousand Dollars
                            ($10,000.00) per week, as defined
                            herein; and,

                 iii.       Twenty percent (20%) of Artist’s
                            “gross earnings”, in excess of Ten
                            Thousand Dollars ($10,000.00) per
                            week, as defined herein;

                *       *    *    *      *   *   *

          D.     Manager agrees that (except as stated in
                 Paragraph #7 below), all gross earnings as
                 herein defined are to be paid directly to
                 Artist by all persons, firms or
                 corporations, and Artist agrees to account
                 for and pay on or before the 15th day of
                 each month any compensation due to the
                 Manager therefrom for the previous calendar
                 month and shall reimburse Manager for any
                 fees, costs or expenses advanced or
                 incurred by Manager related thereto. * * *

                 *      *    *    *      *   *   *

     6.   Artist shall be solely responsible for payment of
          all booking agency commissions, fees, union dues,
          publicity costs, promotional and exploitation
          costs, traveling expenses, telephone charges
          and/or wardrobe expenses and all reasonable
          expenses arising from the performance by Manager
          of service hereunder. In the event that Manger
          [sic] advances any of the foregoing fees, costs or
          expenses on behalf of Artist, or incurs any other
          reasonable expenses in connection with Artist’s
          professional career or with the performance of
          Manager’s service hereunder, Artist shall promptly
          reimburse Manager for such fees, cost or expenses,
          and Manager shall have the additional right to
          recoup said sums from any monies Manager receives
          on Artist’s behalf.

A similar document was executed by Mr. Carino and his daughter on

December 31, 1997.
                               - 6 -

     In late 1995, Mindy Dow extended to Heather an offer to be a

Coca-Cola Kid at Coca-Cola’s Olympic City in Atlanta, Georgia,

from April 1 through September 15, 1996.   At the time this offer

was made, an amount of compensation had not been determined.    The

offer was accepted.

     Mr. Carino made arrangements for the trip to Atlanta and

searched for accommodations for his daughter.   Mr. Carino

testified:

          When I got to Atlanta, most all of the housing
     developments rental places were occupied in
     anticipation and preparation for the 1996 Summer
     Olympics. The ones that were not were the very seedy
     character, and something that I would not myself want
     to live in, yet alone put my client into such a
     situation.

Instead, Mr. Carino signed a 6-month lease for an apartment in

Buckhead, a suburb of Atlanta, which required monthly rent

payments of $1,700.   From April 1 through September 15, 1996, Mr.

Carino incurred total expenses of $24,755 including $7,455 of

travel-related expenditures attributable to 13 round trips he

made from Pittsburgh to Atlanta.4

     In late May or early June 1996, Mindy Dow approached Mr.

Carino and informed him that Coca-Cola was going to pay the Coca-

Cola Kids, including Heather, a salary of $1,745 and that travel



     4
      Mr. Carino maintained a diary reflecting the various
expenses he incurred with respect to his daughter’s performing in
Atlanta. There is no dispute that those expenditures were
actually incurred.
                                - 7 -

and housing expenses would not be covered.    Heather earned only

$1,745 for her performing in Atlanta from April 1 to September

15, 1996.    Mr. Carino’s expenditures greatly exceeded that

amount.   He did not collect the 10-percent fee stated in the

“Personal Management Agreement”, and Heather has not reimbursed

him for the expenses he incurred.   To date, Heather’s earnings as

a dancer are limited to the $1,745 she earned in 1996 as a Coca-

Cola Kid.5

     Mr. Carino incurred $17,300 in expenses in Atlanta which

petitioners claimed on a Schedule C, Profit or Loss From

Business,6 attached to their Federal income tax return for 1996.

Those expenses produced a $17,300 loss which petitioners deducted

in computing their taxable income for 1996.    Petitioners also

claimed $13,485 as car and truck expenses on a Schedule C that

was filed with respect to Mr. Carino’s profession as an attorney.

Respondent issued a notice of deficiency in which he disallowed

the $17,300 in expenses in its entirety and the car and truck

expenses to the extent they exceeded $6,030 (i.e., respondent

reduced petitioners’ claimed expenses by $7,455).    Both the

$17,300 loss and the $7,455 car and truck expenses that


     5
      Mr. Carino testified that he has spent well in excess of
$250,000 on his daughter’s education and training from the ages
of 5 to 18 years.
     6
      The Schedule C, referred to above, lists Mr. Carino’s
principal business or profession as “MANAGER OF PERFORMING
ARTIST”.
                               - 8 -

respondent disallowed as deductions relate to petitioners’

daughter’s stay in Atlanta in 1996.

                            Discussion

     Under section 162(a), taxpayers are allowed a deduction for

all ordinary and necessary expenses paid or incurred during the

taxable year in carrying on a trade or business.   To this end,

“the taxpayer must be involved in the activity with continuity

and regularity and * * * the taxpayer’s primary purpose for

engaging in the activity must be for income or profit.”

Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987).     Under

section 183(a), if an activity engaged in by an individual is not

engaged in primarily for profit, no deduction attributable to

such activity shall be allowed except to the extent allowable

under section 183(b), not relevant herein.   Section 183(c)

defines an “activity not engaged in for profit” as “any activity

other than one with respect to which deductions are allowable for

the taxable year under section 162 or under paragraph (1) or (2)

of section 212.”

     In determining whether an individual engages in an activity

for profit, we consider all the facts and circumstances, Golanty

v. Commissioner, 72 T.C. 411, 426 (1979), affd. without published

opinion 647 F.2d 170 (9th Cir. 1981), including the following

factors identified in section 1.183-2(b), Income Tax Regs.:

     (1)   Manner in which the taxpayer carries on the
           activity;
                               - 9 -

     (2)   The expertise of the taxpayer or his advisers;

     (3)   The time and effort expended by the taxpayer in
           carrying on the activity;

     (4)   Expectation that assets used in 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;

     (8)   The financial status of the taxpayer;

     (9)   Elements of personal pleasure or recreation.

Petitioner bears the burden of proof with respect to this

determination.   Golanty v. Commissioner, supra at 426; McCarthy

v. Commissioner, T.C. Memo. 2000-135.7

     Petitioners argue that Mr. Carino was engaged in the alleged

management activity for profit and cite numerous factors as

evidence thereof:   He maintained a logbook of expenses; he used a

separate checking account while in Atlanta; he was an experienced

attorney in a successful personal injury litigation practice who

took courses in entertainment and sports law and accumulated

books and treatises on that subject; he consulted with purported

experts in the field; he spent considerable time and effort in

the activity to the extent that his law practice suffered; and he



     7
      Petitioners do not argue the applicability of sec. 7491(a),
and the record does not reflect that sec. 7491(a) applies.
                              - 10 -

has incurred no additional losses since 1996 in the activity.

However, we cannot agree that those factors, alone or in

combination, outweigh the inherently personal nature of Mr.

Carino’s association with his daughter.

     Mr. Carino relies heavily on his CLE course work in the

areas of sports and entertainment law and his alleged

representation of a country music singer and his negotiations

with a local football prospect as evidence of his profit motive.

However, he has not been paid by either the singer or the

football prospect for his representation, and he has no agreement

or understanding in place providing him with a percentage of, or

interest in, any future earnings of those parties.

     Petitioners’ daughter has enjoyed success as a dancer, and

we have no doubt that Mr. Carino helped her achieve that success.

However, Mr. Carino’s payment of expenses for the benefit of his

daughter’s dancing activity does not differ in any meaningful way

from the contributions made by most parents for the benefit of

their children.   See Bush v. Commissioner, T.C. Memo. 2002-33;

McCarthy v. Commissioner, supra; DeMattia v. Commissioner, T.C.

Memo. 1998-87; Nova v. Commissioner, T.C. Memo. 1993-563.

     Moreover, we cannot agree that the execution of the

“Personal Management Agreement” by Mr. Carino and his daughter

changes Mr. Carino’s relationship with his daughter from parent

to manager for profit.   We have previously declined to give such
                              - 11 -

effect to these types of arrangements in the case of a parent and

child.   See, e.g., Nova v. Commissioner, supra.

     Mr. Carino admitted at trial that he derived some degree of

personal enjoyment from his involvement in his daughter’s dancing

activities; however, he claims that just because someone enjoys

an activity should not be conclusive with respect to the issue

before us, citing the enjoyment he derives from his legal

practice.   The satisfaction Mr. Carino derives from his legal

practice cannot be compared in principle to the satisfaction he

derives in guiding his daughter in her endeavors.    With respect

to his daughter’s dancing activities, the personal satisfaction

to Mr. Carino is so substantial in our view that it constitutes

the primary motivation for engaging in the activity, especially

where, as here, the possibility of making a profit is so very

small.   See Bush v. Commissioner, supra; Stasewich v.

Commissioner, T.C. Memo. 2001-30; Burger v. Commissioner, T.C.

Memo. 1985-523, affd. 809 F.2d 355 (7th Cir. 1987); sec. 1.183-

2(b)(9), Income Tax Regs.

     Mr. Carino is a successful attorney engaged in a profitable

legal practice.   Together, he and his wife reported substantial

annual income during the times relevant herein.    However, they

also expended considerable amounts in furtherance of their

daughter’s dancing activities.   They seek here to offset their

income in 1996 by the expenses Mr. Carino incurred with respect
                             - 12 -

to his daughter’s performances in Atlanta.   However, petitioners

have not shown to our satisfaction that Mr. Carino was engaged in

this activity for profit rather than in his capacity as a parent.

Accordingly, we sustain respondent’s disallowance of the

deductions petitioners claimed in 1996.


                                              Decision will be

                                          entered for respondent.
