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Although they attempted to obtain insurance for commercial use of
their boat, they never did. Herbert did not check with local
authorities regarding the requirements for operating a passenger-
carrying vessel on a public river. In addition, he did not
investigate whether a business license was required for the
chartering activity. We are not convinced that petitioners
operated their chartering service in a businesslike manner.
Careful investigation of a potential business to ensure the
chance for profitability strongly indicates an objective to
engage in the activity for profit. Sec. 1.183-2(b)(2), Income
Tax Regs. While a formal market study is not required, a basic
investigation of the factors that would affect profit generally
is necessary. Harrison v. Commissioner, T.C. Memo. 1996-509.
Herbert testified that he did not consult with any professionals
about the profitability of the chartering activity. Before
entering into the activity, he did not analyze operating costs to
determine whether the chartering business would be profitable.
This indicates that the chartering service was not engaged in for
profit.
A record of substantial losses over several years may be
indicative of the absence of a profit motive. Golanty v.
Commissioner, 72 T.C. 411, 426 (1979), affd. without published
opinion 647 F.2d 170 (9th Cir. 1981). Petitioners never
generated a profit for the chartering activity during the years
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