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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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