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Ralph Louis Vitale, Jr. - Page 22

Legal Research Home > US Tax Court > 1999 > Ralph Louis Vitale, Jr. - Page 22

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          writing activity.  We accept petitioner's testimony at trial that           
          he was best known at Treasury for his writing ability and that he           
          was often called upon to perform writing-based tasks.  This may             
          have contributed to petitioner's belief that he could make money            
          as an author.  Moreover, we are convinced that petitioner viewed            
          his agreement with Northwest as offering a real potential for               
          generating profit.                                                          
               The next two factors, the taxpayer's history of income or              
          losses with respect to the activity and the amount of occasional            
          profits, if any, which are earned, are examined in tandem.                  
          Respondent argues that petitioner's continuous record of losses             
          from his activity is persuasive evidence that he was not engaged            
          in this activity for profit.  Petitioner argues that, while his             
          efforts as an author have not proved profitable up to this time,            
          his hard work will be rewarded with substantial income when his             
          search for a new publisher proves successful.                               
               It is undisputed that petitioner did report a loss in each             
          year of operation.  However, there are two important facts in               
          this case which should be considered with respect to these                  
          losses.                                                                     
               First, section 1.183-2(b)(6), Income Tax Regs., states that            
          losses incurred during the startup phase of a business are not              
          necessarily indicative of a lack of profit motive.  Because                 
          petitioner did not begin treating his writing activity as a trade           

Last modified: May 4, 2007