Walter C Demattia and Elizabeth J. Crouse - Page 17

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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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