Morgan L.Lucid and Mary J. Lucid - Page 23

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          attempts to change their operating methods to become profitable.            
          They did not advertise or pursue potential customers.                       
          Petitioners took no measures to reduce their expenditures for               
          unprofitable activities.                                                    
               The Financial Status of the Taxpayer.  When petitioners                
          purchased Brendan and Trinity, they were receiving significant              
          professional income.  Petitioners earned gross income of:  (1)              
          $325,213 in 1988; (2) $346,593 in 1989; (3) $321,265 in 1990, and           
          (4) $229,757 in 1991.  Petitioner husband's income as a plastic             
          surgeon allowed petitioners to maintain the activity, and upon              
          his retirement, petitioners dissolved their S corporation, Lucid            
          Cruising, and terminated their activity.  At that point, there              
          was no need to shelter petitioners' income by means of the yacht            
          activities’ claimed losses.                                                 
               The Presence of Elements of Personal Pleasure or Recreation.           
               Although there were many self-serving business-type                    
          statements in Lucid Cruising's corporate minutes, it is readily             
          apparent that petitioners were highly motivated by the pleasure             
          and recreation from these activities.  They were seasoned                   
          recreational sailors for at least 14 years, prior to acquiring              
          Trinity.  Both Brendan and Trinity were custom-built according to           
          specifications for petitioners.  Petitioners have not shown that            
          business was the primary purpose for acquiring the yachts.                  
               We accordingly hold that petitioners have failed to prove              
          that they were engaged in the activity of selling boating                   



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