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objective for the activity in question. See sec. 1.183-2(b)(5),
Income Tax Regs. If petitioner had engaged in similar activity
profitably in the past, it might indicate that the activity in
question was entered into for profit, even though the activity is
presently unprofitable. See id. Petitioner raced automobiles
when he was younger but had to discontinue the activity because
it was too costly. Accordingly, this factor suggests that
petitioner did not engage in the activity for profit.
6. History of Income or Losses From Activity
A history of income, losses, and occasional profits with
respect to an activity can be indicative of whether a profit
motive exists. See sec. 1.183-2(b)(6), Income Tax Regs. The
presence of losses in the formative years of a business is not
inconsistent with an intention to achieve a later profitable
level of operation, bearing in mind, however, that the goal must
be to realize a profit on the entire operation, which presupposes
not only future net earnings but also sufficient net earnings to
recoup losses that have been incurred in the intervening years.
See Bessenyey v. Commissioner, 45 T.C. 261, 274 (1965), affd. 379
F.2d 252 (2d Cir. 1967).
Petitioner began the automobile drag racing activity in
1992. During the years he operated the activity, petitioner
received only small cash awards; however, he spent over $150,000
on the activity, generating losses in each year, including the
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