*1830 Held, upon the evidence that the petitioner was not engaged during the taxable year in carrying on a business within the meaning of the revenue act and that certain expenditures made by the petitioner are not deductible as ordinary and necessary business expenses.
*744 This is a proceeding for the redetermination of a deficiency in income tax for the year 1926 in the amount of $1,597.88. The petitioner alleges that the respondent erred in finding that the petitioner *745 was not engaged in a "business" within the meaning of the revenue acts and that he erred in disallowing a deduction of $8,943.83 claimed by the petitioner as business expenses. The claimed amount $8,943.83, was for the following expenditures:
| Salaries | $5,000.00 |
| Automobile hire and traveling expenses | 3,650.00 |
| Printing | 293.83 |
FINDINGS OF FACT.
The petitioner is a resident of San Diego, Calif.
The petitioner, after 1911, went to England and worked under the Bishop of England, doing social service work. While in England she became conversant with*1831 the writings and teachings of one Joanna Southcott, who died in 1814. She read the 65 works of Joanna Southcott which were in the British library. The remaining works of Joanna Southcott were supposed by her followers to be sealed in an ark in the custody of the British Parliament. The belief prevailed among the followers of Joanna Southcott that the ark would be opened by the 24 bishops of the House of Lords. These writings were to be opened in 1914, 100 years after the death of Joanna Southcott or whenever the nation's troubles demanded that they be opened. As a matter of fact, they have never been opened.
In 1917 petitioner went to San Diego and began to publish the works of Joanna Southcott. She believed that it was her duty to print these books for the benefit of the American people. She did not expect to make a great amount of profit until the ark was opened, at which time she expected a great demand for these works. She employed others to do her printing.
The petitioner, from 1917 to the present time and particularly during the year 1926, has devoted practically all of her time to the work of the printing of the Joanna Southcott writings and the advertising of*1832 such printed books. She advertised in newspapers and magazines and carried banners on the rear and sides of her automobile. Altogether she has expended approximately $38,000 on printing, advertising and incidentals. There have not been many sales of the books and about 200,000 are stored in San Diego. The selling price of the books was from 100 per cent to 200 per cent more than the cost, exclusive of selling expense.
The existing works of Joanna Southcott have been translated into Spanish, French and Hungarian and are read by her followers in the United States, England, Australia and New Zealand. There are about 50,000 of her followers in the United States.
*746 When petitioner first started printing these books she had very little income from any source whatsoever. However, in 1923 certain real estate in Chicago which she had inherited from her husband was sold and the proceeds of that have brought her in considerable income ever since. This is her only source of income except from the sales of books. The income received from the sales of books from the years 1917 to 1926 was in an inconsiderable amount. The largest amount received from the sales of these books*1833 was $226.88 in 1924. In 1926 the amount received from the sales was $46.75. The petitioner did not include this amount in her income-tax return for 1926.
The petitioner left samples of books at a number of bookstores, including Marshall Fields in Chicago, so that orders could be taken, but kept no supply of the books on hand at any of these places.
The petitioner's assistant in this work was Percy Granger Smith. He looked after the printing of the books, helped the petitioner with the proof reading and with the advertising. He attended to the packing and also made speeches at different times in connection with the propagation of these works. During the year 1926 Smith devoted all his time assisting the petitioner in the dissemination of the handbills and the advertising of these publications. The petitioner did not pay him a salary, but she furnished him room and board free and also furnished him money for his clothing and for incidental expenses. Smith had been an evangelist and had also worked in Marshall Field's bookstore.
The petitioner had handbills printed, advertising the works of Joanna Southcott. She distributed these handbills free of charge to different*1834 places. In 1926 the petitioner and Smith spent almost the entire year traveling in an automobile, distributing these handbills and advertising these publications. They distributed during that year approximately 150,000 handbills. Smith drove the car. They kept no account of the expenses of this trip, but the petitioner paid all of the expenses. They attended an Episcopal convention in New Orleans with the hope of getting the bishops attending it interested in the opening of the ark. In all of their travels in 1926 they covered approximately 23,000 miles. They stopped at villages all along the road, left pamphlets at the libraries, camp grounds, boarding houses, and hotels, and sometimes made speeches.
The automobile in which the petitioner and Smith made the trip was purchased by petitioner in December, 1925, for $2,800. She used it for about two years, at the end of which time it had but little value.
The petitioner received a considerable number of letters either inquiring about the works of Joanna Southcott or thanking her for handbills which she had sent.
*747 In 1926 the petitioner expended $222 for printing handbills. She did not expend anything in that*1835 year for printing any of the works of Joanna Southcott.
OPINION.
MCMAHON: The question to be decided in the instant proceeding is whether the activities of the petitioner in the year 1926 in publishing and advertising the works of Joanna Southcott constituted a "business" so that any expenses incurred therein are deductible as ordinary and necessary business expenses within the meaning of the revenue acts.
In , the Supreme Court said:
"Business" is a very comprehensive term and embraces everything about which a person can be employed * * * "That which occupies the time, attention and labor of man for the purpose of a livelihood or profit." Bouvier's Law Dict., page 273.
It is clear that the petitioner in the instant proceeding did not carry on the activities for the purpose of a livelihood. The only question then is as to whether her purpose was to make a profit.
In the case of , the plaintiff was a lawyer who also did farming. The court held that his farming activities did not constitute a business. For the two years in question the evidence showed that*1836 the expenses of the farm were over $16,000, while the income was a little more than $1,000 each year. The court said in that case:
* * * It does seem to me that if a man does not expect to make any gain or profit out of the management of the farm, it cannot be said to be a business for profit, and while I should be the last to say that the making of a profit was not in itself a pleasure, I hope I should also be one of those to agree there were other pleasures than making a profit. Indeed, it makes no difference whether a man is engaged in a business which gives him pleasure, if it be a business; that is irrelevant, as was said in Wilson v. Eisner. But it does make a difference whether the occupation which gives him pleasure can honestly be said to be carried on for profit. Unless you can find that element it is not within the statute, and I cannot see in this case even the first intimation of a reason to suppose that Mr. Davies in his lifetime carried on this farm with the hope of a profit, or that if he had not got anything else out of it except the money which he did get he would have kept on. [Italics ours.]
*1837 In the case of , where the taxpayer resided in New York and was occupied with financial affairs there, but maintained a farm where horses were bred, it was held that his farming activities did not constitute a business, in view of the fact that the farm was operated over a long period of time, i.e., about 20 years, at a loss.
*748 The fact that the petitioner had carried on this work for about 10 years and had derived only an inconsiderable amount of gross income therefrom, while expending large amounts in the work, brings the instant proceeding within the ambit of the two cases just above cited.
The petitioner cites the cases of ; ; and ; affirmed in .
In these cases relied upon by the petitioner, while the parties were carrying on occupations at a loss, it was clear that there was some chance of a profit and a reasonable expectancy thereof. We are of the opinion that in order for an occupation to constitute*1838 a "business" within the meaning of the definition given by the Supreme Court, it must not only be entered into for profit, but that there must be a reasonable expectation of making a profit within a reasonable time. In the instant proceeding it appears from the testimony of petitioner that she did not expect to realize any considerable profit until the opening of the ark and that this depended upon events beyond petitioner's control. There is no evidence to show that any profit could be reasonably expected during petitioner's lifetime. These factors distinguish this case from the cases relied upon by the petitioner. Petitioner's expectation of profit was too uncertain, too fanciful, too remote and too unreasonable to bring the petitioner's activities within the definition of "business" as laid down by the Supreme Court.
We have not overlooked the testimony of petitioner and her assistant, which is not disputed, to the effect that she intended to make the publication of these works her business and expected to derive a profit therefrom. In our view that testimony can be readily reconciled with the conclusion we have reached. As heretofore indicated, it requires more than a*1839 mere intention or expectation of profit to establish that a person is actually engaged in "business."
We therefore hold that the petitioner was not engaged in a business and that she is not entitled to any of the claimed deductions.
Reviewed by the Board.
Judgment will be entered for the respondent.