- 13 -
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
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011