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As stated, petitioners have never made a profit from their
Schedule C activities, and there is no indication from the record
that petitioners can realistically expect profitability in the near
future. Consequently, this factor weighs against a finding of a
profit motive.
7. Taxpayer’s Financial Status
Substantial income from sources other than the activity in
question, particularly if the losses from the activity generate
substantial tax benefits, may indicate that the activity is not
engaged in for profit. See Hillman v. Commissioner, supra; sec.
1.183-2(b)(8), Income Tax Regs.
For 1995 and 1996, petitioners had $174,761 and $181,678,
respectively, in unrelated gross income. During the same years,
they claimed $102,845 and $120,278, respectively, in Schedule C
losses. Petitioners used these losses to reduce their gross income
by 59 percent for 1995 and 66 percent for 1996. These reductions
led to substantial tax savings for petitioners. Consequently, this
factor weighs against a finding of a profit motive.
8. Elements of Personal Pleasure or Recreation
The existence of recreational elements in an activity may
indicate that the activity is not engaged in for profit; on the
other hand, where an activity lacks any appeal other than profit,
a profit motive may be indicated. See Hillman v. Commissioner,
supra; sec. 1.183-2(b)(9), Income Tax Regs.
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