- 31 -
years in issue. Accordingly, we conclude that the frequency of
occasional profits is a factor that favors respondent.
8. The Financial Status of the Taxpayer
Substantial income from sources other than the activity,
particularly if the losses from the activity generate substantial
tax benefits, may indicate that the activity is not engaged in
for profit. Sec. 1.183-2(b)(8), Income Tax Regs.
Petitioners concede that, during the years in issue, they
enjoyed a relatively high level of income from Mr. Abbene's
employment with Pride Chemicals. Petitioners assert, however,
that, without a profit motive, their income could not justify or
sustain the type and size of expenditures that they incurred over
the years. Respondent contends that petitioners' substantial
income from their regular employment allowed them to continue
operating Blue Ribbon despite the heavy losses incurred each
year.
We agree with respondent. Petitioners reported combined
gross income in the amounts of $134,629, $112,136, and $110,245
for 1990, 1991, and 1992, respectively. Clearly, there is no
benefit to losing money when the resulting tax savings represent
less than 100 percent of the loss. Engdahl v. Commissioner, 72
T.C. at 670. Petitioners' substantial income, however, enabled
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