Tolbert S. Wilkinson and Suzanne T. Wilkinson - Page 17

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               A taxpayer's involvement in similar activities in the past,            
          especially where he has converted them from unprofitable to                 
          profitable operations, may indicate a profit objective, despite a           
          currently unprofitable activity.  Sec. 1.183-2(b)(5), Income Tax            
          Regs.  There is no evidence that petitioner has ever operated a             
          ranch before, nor that he has had any profit from any ranching,             
          farming, or guest cottage activities.  This factor favors                   
          respondent.                                                                 
               6.  Petitioner's History of Income or Losses                           
               Neither startup losses nor losses that result from                     
          unforeseen circumstances necessarily show that the taxpayer                 
          lacked a profit objective.  Engdahl v. Commissioner, supra at               
          669; sec. 1.183-2(b)(6), Income Tax Regs.  However, losses                  
          incurred over many years with little likelihood of future profits           
          indicate a lack of profit objective.  Golanty v. Commissioner, 72           
          T.C. at 426.                                                                
               Since its inception and through 1992, petitioners have                 
          consistently reported significant expenses and negligible gross             
          income, thus producing losses from the ranching activity.  The              
          expenses claimed for the years the parties considered (1986-92)             
          total $768,804, while the total income over the same period was             
          only $52,345.  Petitioner argues that considerable expenditures             
          were incurred getting the ranch in working order, buying and                
          training the horses, and that the return for these expenditures             
          would not be seen until several years later.  We are not                    




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