Level 11

IRS doesn't have a policy of allowing a free bite of the Schedule D appetizer before moving on to the Schedule C dinner.  If his story is that he really considered it an investment opportunity and only decided later to make it a business, that's fine.  If you want to coach him to say something else, remember what Shakespeare didn't say (it was Walter Scott)

Oh what a tangled web we weave. When first we practice to deceive.