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7. Amount of Occasional Profits
The amount of occasional profits, if substantial in relation
to losses incurred or the taxpayer’s investment, may indicate a
profit objective. See sec. 1.183-2(b)(7), Income Tax Regs.
In this case, petitioner has never earned a profit from his
activity, and the evidence suggests that any future net profits
are unlikely.
8. Taxpayer’s Financial Status
Substantial income from sources other than the activity,
particularly if the losses from the activity generate substantial
tax benefits, may indicate that the activity is not engaged in
for profit, especially if there are personal or recreational
elements involved. See sec. 1.183-2(b)(8), Income Tax Regs.
During the years in issue, petitioners received Social
Security benefits, pension, interest, and dividend income.
Petitioners were by no means wealthy; however, the losses from
the activity greatly reduced their tax liability.
9. Elements of Personal Pleasure
The existence of personal or recreational elements in an
activity may indicate that the activity is not engaged in for
profit; on the other hand, where an activity lacks any appeal
other than profit, a profit objective may be indicated. See sec.
1.183-2(b)(9), Income Tax Regs.
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Last modified: May 25, 2011