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activity are indicative of petitioner's lack of profit objective
in 1986.
We do not find petitioner's losses after 1986 indicative of
his profit intention in 1986. In 1986, petitioner had reasonably
expected continued success in the drilling business, based on his
earlier success. Moreover, losses sustained because of
unforeseen circumstances, which are beyond the control of the
taxpayer, such as depressed market conditions, would not be an
indication that the activity is not engaged in for profit. Sec.
1.183-2(b)(6), Income Tax Regs. Petitioner maintains, and
respondent does not dispute, that there was a decline in oil
prices during the period at issue, which was largely responsible
for the overall decline in construction and drilling activity
throughout Alaska.
Respondent argues that petitioner's activity should have
been unaffected by the decline in oil prices, because
petitioner's drilling activity consisted only of foundation work
for construction projects and oil companies. Respondent
maintains that there was still a market for petitioner's
services.
We find petitioner's argument more persuasive on this point.
As the figure of speech, "if it's not broken, don't fix it",
suggests, we believe that, when petitioner returned from Norway
in 1986, he conducted his drilling activity in much the same way
he had from 1978 through 1981, when he had earned large revenues
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