- 11 -
Fairbanks' intellectual property will appreciate in value.
Petitioner conceded that he has never built a working
prototype of the pool heating unit. Petitioner's forecast of
million-dollar profits is therefore based upon mere speculation.
Petitioner has also failed to produce any projected revenue
stream studies or to substantiate the cost of producing even one
remote-controlled pool heating unit.
Petitioner's financial status also indicates a lack of
profit motive in his consulting activity. From the record, it is
clear that the only year Fairbanks showed a net profit was 1992,
the first year Fairbanks provided consulting services.
Petitioner reported the following gross receipts and net losses
from Fairbanks on Schedule C for the 1992-97 tax years:
1992 1993 1994 1995 1996 1997
Gross receipts $17,431$5,400 - - - -
Profit/loss5,630 (7,015) ($14,161) ($16,389) ($12,532) ($19,296)
Petitioner also reported the following wage and capital gains
income for the 1992-97 tax years:
1992 1993 1994 1995 1996 1997
Wages and $13,816 $37,453 $69,464 $80,046 $49,617 $51,401
capital gains
The record clearly reflects that petitioner used large net
losses from Fairbanks to offset wage and capital gains income.
In the context of section 183 "profit" means an economic profit,
independent of tax savings. See Surloff v. Commissioner, 81 T.C.
210, 233 (1983).
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011