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4. Expectation That the Property Used in the Activity
Would Appreciate in Value
The fact that a taxpayer expects assets used in an activity
to appreciate in value may indicate that the taxpayer has a
profit objective. Sec. 1.183-2(b)(4), Income Tax Regs. The term
"profit" includes appreciation in the value of assets used in the
activity. Id. Petitioners expected the building to appreciate
in value. This factor favors petitioners.
5. Taxpayer's Success in Other Activities
The fact that a taxpayer has previously engaged in similar
business activities and converted them from unprofitable to
profitable may show that the taxpayer has a profit objective,
even though the activity is presently unprofitable. Sec. 183-
2(b)(5), Income Tax Regs. Petitioners had not previously engaged
in similar business activities. This factor favors respondent.
6. Taxpayer's History of Income or Losses
A history of substantial losses may indicate that a taxpayer
did not conduct an activity for profit. Golanty v. Commissioner,
72 T.C. 411 (1979), affd. without published opinion 647 F.2d 170
(9th Cir., 1981); sec. 1.183-2(b)(6), Income Tax Regs. However,
a taxpayer may have a profit objective even when the activity has
a history of losses. Bessenyey v. Commissioner, 45 T.C. 261, 274
(1965), affd. 379 F.2d 252 (2d Cir. 1967). A series of losses
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