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Tax Regs. While a formal market study is not required, a basic
investigation of the factors that would affect profit generally
is. Underwood v. Commissioner, T.C. Memo. 1989-625. Respondent
contends that petitioner did no background investigation to
determine if this venture could be profitable or if any of his
co-venturers had ever been successful in this type of activity.
Petitioner did investigate this venture by meeting with the other
investors, investigating Mr. Tillman's credentials, and reading
books on treasure hunting. It is clear from the record that
petitioner did not enter this activity with the hope that regular
finds of treasure would provide a return of his expenditures plus
a small profit. Instead, petitioner entered this activity with
the belief that if treasure were found the return would be so
great that all of his expenses would be recouped and a
substantial profit would be realized. This belief indicates that
petitioner was engaged in this activity with a profit motive.
Cf. sec. 1.183-2(c) Example (6), Income Tax Regs. (wildcat oil
driller engaged in activity for profit when there is a small
chance to make a large profit). Thus, the fact that petitioner's
co-venturers had not shown a record of profits does not indicate
that they did not expect to find gold or treasure in the future.
The factors that most strongly indicate a profit motive are
the time and effort spent in conducting the gold mining and
treasure hunting as well as the lack of personal enjoyment in
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