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Section 1.183-2(b), Income Tax Regs., sets forth
a nonexclusive list of nine factors to be considered in
determining whether an activity is engaged in for profit.
These factors are: (1) The manner in which the taxpayer
carries on the activity; (2) the expertise of the taxpayer
or his advisers; (3) the time and effort of the taxpayer
which is expended in carrying on the activity; (4) the
expectation that the assets which are used in the activity
may appreciate in value; (5) the taxpayer’s success in
carrying on other similar or dissimilar activities; (6)
the taxpayer’s history of income or loss with respect to
the activity; (7) the amount of occasional profit, if any,
which is earned; (8) the taxpayer’s financial status; and
(9) whether the taxpayer experiences personal pleasure or
recreation in carrying on the activity.
Based entirely upon his own testimony at trial,
petitioner argues that he purchased the Cloudia in 1985
and held it in 1990 with the actual and honest objective
of making a profit. He claims to have purchased the
Cloudia for the purpose of renting it to the partners of a
bookstore venture to be opened in Hawaii on the Island of
Maui. Shortly after purchasing the sailboat, petitioner
claims that the bookstore venture was abandoned because the
partners were not able to acquire certain property on which
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Last modified: May 25, 2011