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return, petitioner stated:
This [automobile drag racing] activity, [sic] still in
existence, is operating at a loss, but since there were
no winnings, all expenses are being absorbed as if they
were "hobby losses" and, as such, have no effect on
Adjusted Gross Income. (Schedule 1).
At the end of 1996, petitioner was age 58.
The sick pay petitioner received was from a long-term
disability insurance policy. Petitioner's former employer, ECC
International, paid the premiums on the long-term disability
policy. Petitioner retired from ECC International after
experiencing medical problems.
During the years in issue, petitioner engaged in an
automobile drag racing activity named Emerson Enterprise Racing.
The only asset of Emerson Enterprise Racing was a race car
purchased by petitioner in 1994. Petitioner located his race
car, a two-door batwing 1959 Chevy El Camino, by placing an
advertisement in an Orlando, Florida, newspaper. The previous
owner of the car was a farmer who had stored the car in a barn.
When petitioner went to look at the car in the farmer's barn, it
could barely run, but he decided to purchase it. By spending
over $100,000 during the years he engaged in this activity,
petitioner revamped the car into a bright red dragster that could
legally be driven on streets as well as for racing. The car was
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