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The taxpayer may hope to derive a profit from an activity, and
may intend that, even if no profit is derived from current
operations, an overall profit will result when appreciation in
the value of property used in the activity is realized. Sec.
1.183-2(b)(4), Income Tax Regs.
Although petitioner's work on his drill rig was a source of
personal satisfaction, a drill rig would hardly qualify as a
recreational vehicle. Profit objective is to be determined on an
objective basis. Engdahl v. Commissioner, 72 T.C. 659, 666
(1979). A drill rig drills holes in the ground for purposes of
starting wells or foundations of improvements to real property.
Thus, we do not characterize a drill rig as a recreational
vehicle, as we would a motorcycle or sports car. Section 1.212-
1(b), Income Tax Regs., provides in relevant part, that the term
"income" includes income that the taxpayer may realize in
subsequent taxable years, and is not confined to recurring
income, but applies as well to gains from the disposition of
property. We thus find that, during 1991, petitioner's drill rig
was property held for the production of income within the meaning
of section 212.
Petitioner maintains that his drill rig has a present value
of $500,000 to $750,000. The value of a capital asset is a
function of the stream of income that it can produce, and
petitioner has failed to produce any revenue through the use of
the drill rig. Nevertheless, we are persuaded that the expenses
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