                       T.C. Memo. 1999-362



                     UNITED STATES TAX COURT



          RAYMOND B. AND JOAN M. MARVIN, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13909-98.             Filed October 29, 1999.


     Raymond B. Marvin, pro se.

     Timothy F. Salel, for respondent.

                       MEMORANDUM OPINION


     GOLDBERG, Special Trial Judge:    Respondent determined a

deficiency in petitioners' Federal income tax in the amount of

$2,765 for the taxable year 1996.   Unless otherwise indicated,

section references are to the Internal Revenue Code in effect for

the year in issue.

     The issues for decision are:   (1) Whether petitioners' jade

activity was an activity engaged in for profit within the meaning
                               - 2 -

of section 183, and (2) if so, whether petitioners have

substantiated the nature and amount of various deductions they

claimed on the Schedule C attached to their 1996 Federal income

tax return.

     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.   Petitioners resided in

San Diego, California, when the petition in this case was filed.

References to petitioner in the singular are to petitioner

Raymond B. Marvin.

     During 1996, petitioner was employed as an airport shuttle

driver and cashier by Laurel Travel.   In 1996, petitioner

received wages from Laurel Travel in the amount of $11,155.90.

During 1996, petitioner Joan M. Marvin was employed by Marriott

International.   In 1996, petitioner Joan M. Marvin received wages

from Marriott International in the amount of $17,513.49.

     Petitioner became interested in jade and geology in 1972.

Petitioner does not have a college degree in geology.    Rather,

petitioner claims to have learned about jade primarily from his

stepfather.

     During 1996, petitioners were also engaged in an activity

named Glacial Jadeite (the jade activity).   Petitioners assert

that the jade activity involved consulting, researching, and

developing uses for jade.   Petitioners claim that jade can be
                               - 3 -

used for many purposes including computer chips, tanks, and

bulletproof vests.   In 1993, petitioner began teaching Indian

tribes in Mexico how to identify and mine jade.    Petitioners

believe that jade mining can be a source of revenue for these

Indian tribes.   Petitioners also claim to have consulted with

major computer companies, the United States Government, and high-

level officials of the Governments of Brazil and China regarding

the uses of jade.

     Petitioner contends that he founded Glacial Jadeite as a

sole proprietorship in 1991.   However, we are unable to discern

whether Glacial Jadeite is conducted as a sole proprietorship, a

partnership, or as a joint venture.    In the record, Glacial

Jadeite is described as "a group of associated persons".

Moreover, petitioners did not file a Schedule C with their 1993,

1994, and 1995 Federal income tax returns indicating that they

operated a sole proprietorship.     Petitioners have also failed to

explain their financial interest in Glacial Jadeite.    In fact,

petitioners have failed to provide any details regarding Glacial

Jadeite's ownership.   Rather, petitioners contend that they were

consultants to Glacial Jadeite in 1996.

     Petitioners claim that Glacial Jadeite was involved in many

profitable projects during 1996.1    Petitioners have failed to

1
     As an example, petitioners allege that Glacial Jadeite is
involved in the construction of hotels and that the first floor
                                                   (continued...)
                                 - 4 -

provide reliable evidence that would support these assertions.

The sole document that petitioners provided is entitled

"Custodial Trust Contract".    The document purports to be a

contract between Glacial Jadeite and a company called Creative

Technology Alliance (CTA).    The contract provides that Glacial

Jadeite will hold in trust for CTA $600 million worth of jade and

that CTA will use the jade as collateral to acquire loans for

Glacial Jadeite.    Petitioners failed to provide documents that

describe CTA.   Moreover, petitioners have not provided any

evidence that demonstrates that Glacial Jadeite possesses $600

million worth of jade or that CTA has the ability to secure

financing for Glacial Jadeite.    Petitioners further claim that in

accordance with the contract, deposits of $25 million and $65

million were placed in an escrow account in Orlando, Florida.

Petitioners failed to present documents that substantiate these

alleged deposits.

     Petitioners did not maintain formal accounts or books for

the jade activity.    Instead, petitioners contend that they used

their personal checking accounts and credit cards to pay the jade

activity's expenses.    Petitioners also failed to provide a

1
 (...continued)
of the hotels will be constructed of black jade and grouted with
gold and platinum. Petitioners also allege that Glacial Jadeite
is involved in the construction of a stadium that will be
constructed entirely out of jade. Petitioners also claim that
Bill Gates of Microsoft has offered to purchase Glacial Jadeite
for $273 million.
                               - 5 -

business plan, financial projections, and financial statements

for the activity.

     On the Schedule C attached to their 1996 Federal income tax

return, petitioners reported a net loss from Glacial Jadeite in

the amount of $18,440.   On the Schedule C, petitioners reported

no gross income and claimed substantial deductions for car and

truck expenses and rent.   The return also reflects claimed

deductions for insurance, office expenses, repairs, meals and

entertainment, and miscellaneous expenses.    Included in the rent

expense, petitioners claimed home office expenses in the amount

of $9,600.   The home office expense consists of residential lease

payments that petitioners made in 1996.    For the year 1997,

petitioners reported that the jade activity had gross receipts of

$50 and expenses of $18,578.85.   Petitioners claim that the jade

activity had gross receipts of $250 and expenses of approximately

$18,000 for the year 1998.

     Respondent determined that petitioners' jade activity was

not an activity engaged in for profit.    In the alternative,

respondent determined that petitioners' claimed Schedule C

expenses were personal expenses and not ordinary and necessary

business expenses.

     Section 183 provides that if an activity engaged in by an

individual is not engaged in for profit, no deduction

attributable to such activity shall be allowed, except as
                               - 6 -

provided in section 183(b).   In the case of an activity not

engaged in for profit, section 183(b)(1) allows a deduction for

expenses that are otherwise deductible without regard to whether

the activity is engaged in for profit.   Section 183(b)(2) allows

a deduction for expenses that would be deductible only if the

activity were engaged in for profit, but only to the extent that

the total gross income derived from the activity exceeds the

deductions allowed by section 183(b)(1).

     An "activity not engaged in for profit" is any activity for

which deductions would not be allowed under section 162 or under

paragraph (1) or (2) of section 212.   See sec. 183(c).   Section

162 allows a deduction for all the ordinary and necessary

expenses paid or incurred in carrying on a trade or business.

Section 212 allows a deduction for all the ordinary and necessary

expenses paid or incurred for the production or collection of

income, or for the management, conservation, or maintenance of

property held for the production of income.   The profit standards

applicable to section 212 are the same as those applicable to

section 162.   See Antonides v. Commissioner, 893 F.2d 656, 659

(4th Cir. 1990), affg. 91 T.C. 686 (1988).

     For a taxpayer to deduct expenses of an activity pursuant to

section 162, the taxpayer must show that he or she engaged in the

activity with an actual and honest objective of making a profit.

See sec. 183; Ronnen v. Commissioner, 90 T.C. 74, 91 (1988);
                               - 7 -

Fuchs v. Commissioner, 83 T.C. 79, 97-98 (1984); Dreicer v.

Commissioner, 78 T.C. 642, 645 (1982), affd. without opinion 702

F.2d 1205 (D.C. Cir. 1983); sec. 1.183-2(a), Income Tax Regs.

Although a reasonable expectation of profit is not required, the

taxpayer's profit objective must be bona fide.   See Hulter v.

Commissioner, 91 T.C. 371, 393 (1988); Beck v. Commissioner, 85

T.C. 557, 569 (1985).   Whether a taxpayer had an actual and

honest profit objective is a question of fact to be resolved from

all relevant facts and circumstances.   See Carter v.

Commissioner, 645 F.2d 784, 786 (9th Cir. 1981), affg. T.C. Memo.

1978-202; Hulter v. Commissioner, supra at 393; Golanty v.

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

opinion 647 F.2d 170 (9th Cir. 1981).   Greater weight is given to

objective facts than to a taxpayer's statement of intent.    See

Beck v. Commissioner, supra at 570; Thomas v. Commissioner, 84

T.C. 1244, 1269 (1985), affd. 792 F.2d 1256 (4th Cir. 1986); sec.

1.183-2(a), Income Tax Regs.

     Section 1.183-2(b), Income Tax Regs., provides a

nonexclusive list of factors that should be considered in

determining whether an activity is engaged in with 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 or her advisers; (3) the time and effort expended

by the taxpayer in carrying on the activity; (4) the expectation
                                - 8 -

that the assets used by the taxpayer 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, nor the existence of

even a majority of the factors, is controlling, but rather it is

an evaluation of all the facts and circumstances in the case,

taken as a whole, which is determinative.   These factors are not

applicable or appropriate in every case.    See Abramson v.

Commissioner, 86 T.C. 360, 371 (1986).

     Based upon the above factors, we find that petitioners did

not engage in the jade activity for profit.

     First, petitioners did not conduct the jade activity in a

businesslike manner.   Petitioners did not maintain formal

accounts or books for the jade activity.    Petitioners also failed

to present a business plan, financial projections, and financial

statements for the jade activity.   Petitioners' failure to

maintain complete and accurate records demonstrates that they

failed to take the ordinary care of business people in managing

and monitoring their affairs.   See Elliott v. Commissioner, 90

T.C. 960, 971-972 (1988), affd. without published opinion 899

F.2d 18 (9th Cir. 1990).
                                - 9 -

     Petitioners received income from sources other than the jade

activity in 1996.    In 1996, petitioner was employed by Laurel

Travel, and petitioner Joan M. Marvin was employed by Marriott

International.   From these employments in 1996, petitioners

received wage income in the amount of $28,669.39.

     For the years 1996 through 1998, petitioners' jade activity

consistently generated minimal income and large deductions.      On

the Schedule C attached to their 1996 Federal income tax return,

petitioners reported no income and claimed deductions in the

amount of $18,440.    For the year 1997, petitioners reported $50

of gross receipts and $18,528.85 of deductions.      For the year

1998, petitioners claim that Glacial Jadeite had gross receipts

of $250 and expenses in the approximate amount of $18,000.

Moreover, petitioners’ claims that Glacial Jadeite is involved in

profitable projects is unavailing.      Petitioners have failed to

provide reliable documents that substantiate their assertions and

we refuse to rely upon petitioner's self-serving testimony.      See

Niedringhaus v. Commissioner, 99 T.C. 202, 219-220 (1992);

Tokarski v. Commissioner, 87 T.C. 74, 77 (1986).      Furthermore,

petitioners have also failed to explain how and to what extent

they would financially benefit from these supposed projects.

     Lastly, petitioners received personal pleasure from the jade

activity.   Petitioner's activities provided a source of

recreation that satisfied petitioner's personal interest in jade.
                               - 10 -

Petitioners' search for jade also allowed petitioners to take

field trips to the beaches of Southern California and the deserts

of New Mexico.   Moreover, petitioners won several ribbons for

their jade exhibits at gem and mineral exhibitions.   We find that

petitioner's own testimony reveals petitioners' true purpose for

engaging in the jade activity.   During the trial, petitioner

described members of gem and mineral societies as "a collection

of good-hearted people with a hobby vested interest".   Petitioner

further described the jade activity as an "anti-job" that is

exciting, fun, and relaxing.

     For the foregoing reasons, we find that petitioners did not

engage in the jade activity for profit.   Accordingly, we hold

that petitioners are not entitled to the Schedule C deductions

they claimed on their 1996 Federal income tax return.

     Based upon our holding, we need not and do not decide

whether petitioners have substantiated the nature and amount of

the claimed expenses.

     To reflect the foregoing,

                                          Decision will be entered

                                    for respondent.
