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