Retail Industry ATG - Chapter 3: Examination Techniques for Specific
Industries (Direct Sellers)
We want to ensure in our audits that examiners are not prejudicial when considering whether taxpayers are
engaged in any particular industry for profit. Each taxpayer is entitled to be evaluated by a fair, impartial examiner
so that a fully reasoned determination can be made.
What an Examiner Should Not Do – An examiner should not tell a taxpayer that, because he is involved in a
particular business activity, it is not possible to make a profit and his losses are therefore disallowed.
What an Examiner Should Do – An examiner should thoroughly interview the taxpayer to gather the factual
information to evaluate each of the nine factors outlined above. If it is determined that there is no profit motive and
the taxpayer does not agree, the examiner should also consider an alternative position in the event that it is later
determined that the taxpayer was engaged in the activity for profit. Expense items of a material nature should be
examined. The taxpayer should be informed of the dual nature of our approach.
Fair and consistent treatment of taxpayers is a cornerstone of tax administration. We must always be concerned
with the perception by taxpayers of inequitable treatment.
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