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does not have a substantial element of recreation. The failure
of a taxpayer to devote substantial time to an activity may weigh
against a profit objective, unless, for example, the taxpayer
employs capable personnel to conduct the activity in his or her
stead. Sec. 1.183-2(b)(3), Income Tax Regs.
As an airline pilot working 1- to 2-weeks on and then 1- to
2-weeks off, petitioner had substantial blocks of time available
to devote to his Windmill Distillery activity. He testified that
at certain points he "tried" to spend 35 to 40 hours a week on
the project, although he did not state how much time he actually
spent. At certain points, he retained construction crews and
other workmen whose activities he oversaw. Overall, it appears
petitioner devoted significant amounts of time and energy to his
project. This factor supports a conclusion that petitioner's
activity was profit motivated.
4. Expectation That the Assets Will Appreciate in Value
The term "profit" includes the appreciation in the value of
assets used in an activity. Sec. 1.183-2(b)(4), Income Tax Regs.
Petitioner has not established that he expected the assets he
used or created to increase in value so as to produce an overall
profit. This factor does not support a conclusion that
petitioner's activity was profit motivated.
5. Taxpayer's Success in Similar or Dissimilar Activities
Although an activity is unprofitable, we may take into
account whether the taxpayer previously converted similar
activities from unprofitable to profitable enterprises. Sec.
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Last modified: May 25, 2011