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From 1992 to 1997, petitioner has reported net losses of
only $69,313 while generating a net profit of $5,630. Such a
history of successive and consistent losses does not support
petitioner's contention that he was engaged in a trade or
business for profit for the year in issue. "Substantial income
from sources other than the activity (particularly if the losses
from the activity generate substantial tax benefits) may indicate
that the activity is not engaged in for profit especially if
there are personal or recreational elements involved." Sec.
1.183-2(b)(8), Income Tax Regs.
At trial, petitioner expressed great satisfaction in owning
the sophisticated computer hardware and software which he had
purchased between 1992 and 1997. Petitioner stated that he
sometimes used the computers for personal reasons, such as to
"interface" with his children.
Petitioner continued to buy new equipment every year even
though Fairbanks was consistently generating large losses. These
tax losses offset petitioner's wage and capital gains income,
and, in effect, subsidized petitioner's yearly purchases of new
and more sophisticated computer equipment.
In sum, we find that petitioner did not conduct his
consulting activity in a businesslike manner or with continuity
and regularity for the 1995 tax year. On the basis of the
record, we find that petitioner did not engage in his consulting
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