Alton F. Emerson - Page 13




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          this factor suggests that petitioner did not operate his                    
          automobile drag racing activity for profit.                                 
               8.  Taxpayer's Financial Status                                        
               The lack of substantial income from sources other than the             
          activity in question may indicate the existence of a profit                 
          objective.  See sec. 1.183-2(b)(8), Income Tax Regs.  The                   
          rationale for this rule is that a taxpayer with substantial                 
          income unrelated to the activity can more easily afford to                  
          operate the activity as a hobby.                                            
               In 1995, petitioner received $49,218.01 in disability pay,             
          $51,600 in IRA distributions attributable to his disability, and            
          $37,500 in premature IRA distributions.  At trial, petitioner               
          stated that the automobile racing activity is "almost like                  
          gambling."  To support his addiction to this activity, petitioner           
          withdrew $37,500 in IRA distributions prematurely.  In addition,            
          he used part of the money designated for his disability to fund             
          the activity.  Petitioner had substantial income unrelated to the           
          automobile racing activity.  Accordingly, this factor does not              
          favor petitioner.                                                           
               9.  Elements of Personal Pleasure                                      
               The absence of personal pleasure or recreation relating to             
          the activity indicates the presence of a profit objective.  See             
          sec. 1.183-2(b)(9), Income Tax Regs.  There is no question that             
          petitioner enjoyed and obtained pleasure from his automobile drag           






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