Anthony J. McCarthy - Page 8




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                  3.  Taxpayer's Time and Effort.                                                      
                  The fact that a taxpayer spends much time and effort in                              
            conducting an activity may indicate that he or she has a profit                            
            objective, particularly if the activity does not have substantial                          
            personal or recreational aspects.  See sec. 1.183-2(b)(3), Income                          
            Tax Regs.  In McCarthy I, T.C. Memo. 1997-436, we found that                               
            petitioner “devoted most of his spare time” to Benjamin's racing                           
            and that he “has extended his time and effort well beyond the                              
            degree that parents ordinarily devote to their children's                                  
            ‘extracurricular’ interests.”  In this case, however, there can                            
            be no doubt that petitioner, who himself was an amateur motocross                          
            racer for 2 years, experienced personal joy in observing his son                           
            participate in motocross racing and in helping his son pursue the                          
            activity.  Although elements of personal satisfaction do not                               
            necessarily negate a profit motive, see, e.g., Ranciato v.                                 
            Commissioner, 52 F.3d 23, 26 n.4 (2d Cir. 1995), vacating T.C.                             
            Memo. 1993-536, we find in this case that the father-son                                   
            relationship involved and the considerable amount of personal                              
            satisfaction and recreation derived by both taxpayer and his son                           
            outweigh the significant time and effort invested.                                         
                  A taxpayer’s withdrawal from another occupation to devote                            
            most of his energies to the activity may also be evidence that                             
            the activity is engaged in for profit.  See sec. 1.183-2(b)(3),                            
            Income Tax Regs.  The record shows that, at all pertinent times,                           






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