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Viewing the record as a whole, we believe that petitioner,
in 1986, had a bona fide intention to derive a profit from his
drilling activity. Petitioner had operated a successful drilling
business in 1978 through 1981, prior to accepting employment in
Norway at the end of 1981. In the taxable years 1979 through
1981, petitioner earned approximately $300,000 in revenues from
his drilling business. Although the record contains no direct
evidence of petitioner’s profits in 1979-81, the gross revenue
that he earned in these years must have generated profits. The
existence of such profits can be inferred from the levels of
annual expenses in later years for which we do have evidence.
Because petitioner's drilling operation from 1978 through
1981 had been successful, he reasonably believed that drilling
work would be available upon his return to Alaska in 1985. Cf.
sec. 183(d). The fact that a drop in oil prices coincided with
petitioner's attempt to reactivate the business does not weigh
against petitioner's profit objective in 1986, even if we were to
conclude, in the light of hindsight, that petitioner's
expectation of profitability was unreasonable in 1986. Provided
petitioner had a genuine expectation of profit during 1986, as we
believe he did, the possibility or probability that it may have
been or become objectively unreasonable does not gainsay our
conclusion that petitioner was engaged in the activity for profit
in 1986. See Stahnke v. Commissioner, T.C. Memo. 1980-369.
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