- 14 -
mining for gold. Almost every weekend during the years in issue,
petitioner would leave his home on Thursday evening and drive up
to 150 miles into the desert area of southern California to mine
for gold.
This factor favors petitioners’ position.
4. The Expectation That Assets Used in the Activity
May Appreciate in Value
The term “profit” encompasses revenue from operations and
appreciation in the value of assets, such as land. Sec. 1.183-
2(b)(4), Income Tax Regs. Petitioner did not own any gold-
bearing land or any mining claims, and his equipment could only
depreciate. Some equipment such as ropes and other climbing
apparatus required frequent replacement for safety reasons. In
the absence of any property with substantial appreciation
potential, we do not consider this factor significant.
5. Petitioner’s Success in Other Entrepreneurial Activities
The fact that a taxpayer has engaged in similar activities
in the past and converted them from unprofitable to profitable
enterprises may indicate that the taxpayer is engaged in the
present activity for a profit, even though the activity is
presently unprofitable. Sec. 1.183-2(b)(5), Income Tax Regs.
After being employed as a field engineer by several
companies over a 17-year period, petitioner started his own
business, Brown Construction, in 1988. Brown Construction
provided general field engineering services to the mining
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011