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We find Dr. DeMattia's statements regarding the degree of
effort and time spent on the activity not credible given
Constant's extended period of illnesses and injuries, the limited
number of tournament appearances, and his work as a golf
instructor which preempted his ability to participate in
tournaments or further develop his skills. Furthermore, we
believe that the potential profitability from the sponsorship
agreements was not a motivating factor in Dr. DeMattia's decision
to retire from his dental practice. For example, Dr. DeMattia
admitted that Government regulations and employee issues had
rendered his day-to-day operations less enjoyable. Given this
testimony, we find that Dr. DeMattia's retirement is not evidence
of a profit motive towards the sponsorship agreement. This
factor supports respondent's determinations.
4. Expectation That the Assets Will Appreciate in Value
"Profit" encompasses appreciation in the value of the
assets. Sec. 1.183-2(b)(4), Income Tax Regs. Therefore, in
evaluating a taxpayer's intent, we also look to the taxpayer's
expectation that the assets used in the activity may appreciate
in value.
Traditionally, the potential for asset appreciation is
associated with land and other tangible assets. Here,
petitioners argue that there is some potential for the value of
the sponsorship agreements to increase. This argument is based
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