Robert J. Dwyer and Catherine Dwyer - Page 8

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               Petitioners argue that Robert's activities during 1989                 
          resulted in a net loss of $94,000, which, they say, is not an               
          indication of participating in a "gainful activity".  But we have           
          held in another context, which by analogy is relevant here, that            
          a taxpayer may be engaged in a profit-making activity, even                 
          without actually making a profit in a given year, if the                    
          individual has an actual and honest profit-making objective.  See           
          Dreicer v. Commissioner, 78 T.C. 642, 646 (1982), affd. without             
          published opinion 702 F.2d 1205 (D.C. Cir. 1983).  We equate a              
          "substantial gainful activity" in this context with an "actual              
          and honest objective of making a profit."  Obviously, petitioner            
          did not have failure to make a profit as his objective, even                
          though as it turned out he failed to make a profit from his                 
          trading activities in 1989.                                                 
               Petitioners criticize, as being too restrictive, the                   
          regulatory standard of a mental disease impairment that would be            
          considered as preventing gainful activity.  The standard is                 
          contained in section 1.72-17A(f)(2)(vi), Income Tax Regs., which            
          reads as follows:                                                           

                         (vi)  Mental diseases (e.g., psychosis                       
                    or severe psychoneurosis) requiring continued                     
                    institutionalization or constant supervision                      
                    of the individual;                                                

               Petitioners argue that Robert was under "constant                      
          supervision" for two years and that the alternative regulatory              

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