Your client, Susan Nipentuck, is a skilled plastic surgeon. She recently purchased a yacht on which she flies a large pennant with a medical emblem (caduceus) displayed thereon. Susan usually operates her yacht in waters she believes are frequented by the rich and famous (on their yachts). Susan has told you that she purchased the yacht and flies the pennant to help advertise her profession and thus attract new patients. As she explained to you, other boaters see the pennant and are intrigued as to its meaning. Some have approached me in the dock area to inquire what it means. Sometimes, I giveout business cards. Operating the yacht is not cheap. During the current tax year, Susan incurred the following costs and expenses: Fuel and Oil $ 2,400 Insurance 3,000 Repairs & Maintenance 4,250 Property Taxes 1,800 Moorage Fees 3,600 Depreciation 15,000 Total $ 30,050 Susan has asked you if she may deduct as ordinary and necessary business expenses the costs of operating, insuring and maintaining the yacht. You clarified that she does not ask potential patients onto the yacht. She simply views the yacht as a floating billboard.

Primary Issue: Is Susan engaged in an active trade or business that will allow her to deduct the costs and expenses associated with owning and operating her yacht? Hint: Start with IRC 162 and the related pertinent Treasury regulations. Also, review Robert Lee Henry and Betty Jane Henry v. Commissioner, 36 T.C. 879.