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racing activity. Although this factor standing alone does not
indicate that petitioner did not engage in this activity for
profit, the combination of factors is fatal to petitioner's case.
Although petitioner's testimony was frank and generally
credible, it was also vague and unsubstantiated. He had no
records and testified from memory.
On the basis of the record, we find that petitioner did not
engage in the automobile drag racing activity for profit.
Accordingly, respondent is sustained on this issue, and
petitioner is not allowed to deduct Schedule C expenses
associated with this activity in 1995.
Issue 2. Whether Long-Term Disability Payments Received by
Petitioner in 1995 and 1996 Are Includable in Gross Income
Section 61(a) provides that gross income means all income
from whatever source derived. Certain income, however, may be
specifically exempted from inclusion in gross income. See sec.
61(b).
Gross income does not include amounts received through
accident or health insurance for personal injuries or sickness
(other than amounts received by an employee to the extent such
amounts are (1) attributable to contributions by the employer
which were not includable in the gross income of the employee; or
(2) paid for by the employer). See sec. 104(a)(3). In Trappey
v. Commissioner, 34 T.C. 407, 408 (1960), we held that disability
income received through accident or health insurance for personal
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