John Shackelford Fairbanks - Page 12

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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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