- 16 -
no need for him to negotiate a higher percentage of profits plus
insist on reimbursement of out-of-pocket expenses before
distribution of profits. Petitioner's negotiations indicate a
profit motive. See Gefen v. Commissioner, 87 T.C. 1471, 1498
(1986) (partner negotiating terms of partnership's transactions
to partnership's best advantage was a factor in deciding that
partnership was engaged in activity with the intention of making
a profit).
Petitioner was admittedly not an expert in the gold mining
and treasure hunting business. However, we find that petitioner
did ally himself with experts sufficient to give this venture an
opportunity to be successful. Although there were some
inconsistencies between petitioner's testimony regarding Mr.
Tillman's experience and the summary sheet of Mr. Tillman's
experience, we are convinced that petitioner was aware of Mr.
Tillman's credentials when making his decision to join
International Recoveries in this joint venture. Both petitioner
and Mr. Saldivar credibly testified that Mr. Tillman was in
charge of the operations, and we are convinced that petitioner
reasonably believed that Mr. Tillman was an expert in salvage
operations.
Careful investigation of a potential business to insure the
best chance for profitability strongly indicates an objective to
engage in the activity for profit. Sec. 1.183-2(b)(2), Income
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011