Rick and Ruth Baime Richards - Page 8

                                        - 8 -                                         
          v. Commissioner, 315 F.2d 731, 736 (9th Cir. 1963), affg. T.C.              
          Memo. 1961-256.  Whether the taxpayer had the requisite profit              
          objective is a question of fact to be resolved from all relevant            
          facts and circumstances.  See, e.g., Drobny v. Commissioner, 86             
          T.C. 1326, 1341 (1986), affd. 113 F.3d 670 (7th Cir. 1997); sec.            
          1.183-2(b), Income Tax Regs.  Profit in this context means                  
          economic profit independent of tax savings.  See, e.g., Antonides           
          v. Commissioner, 91 T.C. 686, 694 (1988), affd. 893 F.2d 656 (4th           
          Cir. 1990).                                                                 
               Section 1.183-2(b), Income Tax Regs., provides a non-                  
          exclusive list of factors we consider to determine whether the              
          taxpayers are engaged in the venture with a profit objective.               
          They include:  (1) The manner in which the taxpayers carried on             
          the activity; (2) the expertise of the taxpayers or their                   
          advisers; (3) the time and effort expended by the taxpayers in              
          carrying on the activity; (4) the expectation that the assets               
          used in the activity may appreciate in value; (5) the success of            
          the taxpayers in carrying on other similar or dissimilar                    
          activities; (6) the taxpayers’ history of income or loss with               
          respect to the activity; (7) the amount of occasional profits               
          that are earned; (8) the financial status of the taxpayers; and             
          (9) whether elements of personal pleasure or recreation are                 
          involved.  No single factor is controlling, and we do not reach             
          our decision by merely counting factors that support each party’s           

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011