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during the initial stage of an activity does not necessarily
indicate that the activity was not conducted for profit. Engdahl
v. Commissioner, supra at 669; sec. 1.183-2(b)(6), Income Tax
Regs.
The antique store was not profitable during any of the 4
years it was open. Petitioners did little or nothing to sell the
building and inventory during the 2 years after they knew the
business could not be profitable. They liquidated their
inventory at an auction in 1992. They did not explain why they
waited that long or show that their inventory was difficult to
liquidate. During the period of delay, petitioners continued to
depreciate the building and incur expenses for mortgage,
interest, repairs, maintenance, and utilities for the building.
For 1991, they reported gross receipts of $1,885, cost of goods
sold of $1,802, and expenses of $11,035. For 1992, they reported
gross receipts of $2,589, cost of goods sold of $4,743, and
expenses of $7,496.
This factor favors respondent.
7. Amount of Occasional Profits, if Any
Small occasional profits with large continuous losses do not
establish that the taxpayer had a profit objective. Sec. 1.183-
2(b)(7), Income Tax Regs. This factor generally applies to
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