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1984 through 1993. Mr. Flanagin's history of losses indicates a
lack of a profit motive.
E. Petitioners' Financial Status
Substantial income from sources other than the activity in
question, particularly if the activity's losses generate
substantial tax benefits, may indicate that the activity is not
engaged in for profit. See sec. 1.183-2(b)(8), Income Tax Regs.
In 1992 and 1993, Mr. Flanagin had nonsoftware activity income of
at least $156,773 and $63,838, respectively. Mr. Flanagin could
afford to operate the software development activity as a hobby.
This factor indicates a lack of profit objective.
F. Other Factors
Mr. Flanagin knew that the useful life of the Z-100 was
nearing its end. Petitioners argue, however, that Mr. Flanagin's
work relating to the Z-100 was laying the foundation for
developing PC-compatible software. At the trial, Mr. Flanagin
testified that he had no evidence to support this contention.
Even if Mr. Flanagin had been attempting to move into the PC-
compatible market, the aforementioned factors still weigh against
petitioners.
G. Conclusion
After reviewing the entire record, we conclude that Mr.
Flanagin did not engage in the software development activity with
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