Ralph Louis Vitale Case Summary

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Citation: Ralph Louis Vitale, T.C. Memo. 1999-131 Issues 1. Was Vitale in the trade or business of being an author during the years in issue? 2. If so, are the expenses Vitale incurred deductible as ordinary and necessary under Section 162? 3. Has Vitale adequately substantiated his travel expenses under Section 274(d)? Facts Vitale worked as a full-time budget analysis for the U.S. Department of the Treasury, where he was required to apply professional level writing ability to create high quality written work. He also served as editor of an in-house newsletter to the Treasury. Two years before his retirement, the petitioner began writing outside of his full-time position in hopes to make it a second career. While pursuing his writing interest, Vitale had the idea for a second book to be based upon the story of two men who travel across the country to patronize a legal brothel. He decided to visit various legal brothels in Nevada in order to help develop characters for his book, and to validate his story. The petitioner kept a logbook containing the dates (sometimes hours) and names of the brothels he visited,…show more content…
Losses suffered during the initial phases of a business are not necessarily a lack of profit motive, as illustrated in Golanty v. Commissioner. Similarly, the court stated that a petitioner’s goal must be to actually realize profit on their operation. It is further assumed that after earning a profit, the petitioner must earn enough to recoup from the sustained losses. Like Golanty, Vitale specifically declared his plans to recover from his losses, and to further produce income. The court determined that the years in question are the initial stages of the petitioner’s writing activity, and it is not out of the ordinary to encounter losses. Therefore, the history of income or loss does not weigh against him in this
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