the losses from boat chartering and residential rental activities
concerns whether those endeavors were "not engaged in for profit"
within the meaning of section 183.2 For simplicity and clarity,
we set forth the background facts and legal principles applying
generally to the boating and residential rental activities.
Thereafter, combined findings of fact and legal discussion are
presented in separate sections for each issue.
I. Background3
Petitioners, at all relevant times, were married, filed
joint income tax returns, and resided in Orinda, California.
Petitioners are medical doctors: Mrs. Hilliard is a psychiatrist
and Mr. Hilliard is a cardiologist. They practice medicine on a
full-time basis.
Mr. Hilliard has been involved in sailing as a hobby since
1966, and he purchased a small sailboat in 1970 and a fixed-keel
boat in 1975 or 1976 for his personal use.
On their 1986, 1987, and 1988 joint tax returns, petitioners
jointly reported wages and net income from the practice of
medicine in amounts ranging from approximately $166,000 to
$230,000 per year. Against the income reported, petitioners
claimed losses attributable to boating and residential rental
activities. Petitioners reported boat chartering income and
2 Section references are to the Internal Revenue Code in
effect for the years in issue. Rule references are to this
Court's Rules of Practice and Procedure.
3 The parties' stipulations of facts and exhibits are
incorporated by this reference.
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