-13- 3. The Time and Effort Expended by the Taxpayer in Carrying On the Activity We next consider the time and effort petitioner expended in carrying on the drag racing activity. A taxpayer’s devotion of much time and effort to conducting an activity, particularly if the activity does not have substantial personal or recreational aspects, may indicate an intention to derive a profit. Sec. 1.183-2(b)(3), Income Tax Regs. The fact that a taxpayer devotes a limited amount of time to an activity does not necessarily indicate a lack of profit motive where the taxpayer employs competent and qualified persons to carry on the activity. Id. Petitioner expended an adequate amount of time on the drag racing activity during the years at issue. Petitioner competed in eight races in 1999 and 2000 and six races in 2001. When petitioner was unable to race, petitioner’s son raced petitioner’s car. Petitioner testified that he limited the number of races in which he competed because he did not have sponsorship and was trying to minimize costs. Petitioner’s report to Sac and Fox for 1998, however, indicates he undertook some activity on behalf of Sac and Fox on 31 days during that year. See Canale v. Commissioner, supra (taxpayer decreased the number of races entered after the taxpayer decided to leave racing but had devoted substantial time to racing in previous years). Petitioner introduced no evidence regarding the number of hours per week he spent on drag racing but indicated it varied, depending on, for example, the level of repairs needed after a race. Petitioner’s schedule, although full-time, wasPage: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
Last modified: May 25, 2011