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losses for the first 5 years they operated the charter service,
yet we held that the deduction of those losses was not barred by
section 183 because the facts of the case indicated that the
taxpayers had an intent to make a profit. The facts of this case
likewise indicate that petitioners had an intent to make a
profit.
We also note that although petitioners in this case
sustained losses in the first 5 years of their operation, they
reported a gross profit for the 1996, 1997, and 1998 taxable
years.
At trial, respondent argued that petitioners intentionally
altered the reporting of their Schedule C income and expenses for
the 1996, 1997, and 1998, taxable years in order to artificially
create the appearance of profit through the exclusion of
deductible expenses and the inclusion of unrelated income. We do
not agree.
Though petitioners’ income has fluctuated due to membership
changes and the general fortunes of the bass fishing industry,
the record establishes that petitioners’ expenses declined in
1996, 1997, and 1998, due to contributions from sponsors, a
decrease in travel costs, and reduced expenses. In addition,
petitioners’ income rose in 1996 as a result of petitioner’s
promotion to Supervising Director and from income earned by
petitioners from the weigh station at Lake O.H. Ivie.
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