Your POI has no authority to interpret the regulation and is bound by both the regulation, any legal interpretations thereof by the regional or chief legal counsel, and preambles to the federal register. These are defensible, and you may rely on them fully when dealing with your POI...the POI has no flexibility there. Being tactful about it is another matter.
Your POI, of course, was wrong, as the regulations aren't grey, just misunderstood. The regulation is intended to be changable and adaptable with time as circumstances change and new issues arise. For this reason we continually see notices of proposed rule making as changes occur. For this reason we continue to see establishments of policy through legal interpretations. What is usually lacking is effort on the part of individuals, including frequent failures at the FSDO level, to understand the regulation and put in the effort required.
The acid test is not about holding yourself out to the public, as one may hold out if one doesn't charge...one may offer to transport someone else if not for compensation or hire. One may hold out to do that. The acid test is really dependent upon the circumstances, and too few variables for a given flight have been discussed here. One may hold out. One may not hold out for compensation when taking someone or something from A to B. One may not shell out one dollar shares in an aircraft and circumvent the regulation...ample legal interpretation exists on that count to completely dismiss the idea.
Not discussed here yet are other issues such as an approved drug testing program, etc. What has been brought up, and is irrelevant, is what the IRS has to say on the matter. The issue of what you can take, with respect to the FAA, is purely an issue of what you're allowed to do as a pilot and operator given your specific operation.
