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6. The Taxpayer's History of Income or Loss With Respect
to the Activity
A record of substantial losses over several years may be
indicative of the absence of a profit motive. Golanty v.
Commissioner, 72 T.C. at 426. A series of losses during the
initial or startup stage of an activity, however, may not
necessarily be an indication that the activity is not engaged in
for profit. Sec. 1.183-2(b)(6), Income Tax Regs. Moreover, if
losses are sustained because of unforeseen or fortuitous
circumstances which are beyond the control of the taxpayer, such
losses would not be an indication that the activity was not
engaged in for profit. Id. Petitioners assert that Blue
Ribbon's losses were incurred during its startup stage and that
the losses were due, in part, to circumstances beyond their
control.
Although the presence of losses in the early years of an
activity is not inconsistent with an intention to make a profit,
the goal must be to realize a profit on the entire operation,
Bessenyey v. Commissioner, supra at 274, a proposition that
presupposes not only future net earnings but also sufficient net
earnings to recoup the losses which have meanwhile been sustained
in the intervening years, id.
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