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that if a significant amount of gold were found, the return would
be so great that any past accumulated expenses would be recouped
and a substantial profit would be realized. See sec. 1.183-2(a),
Income Tax Regs. (“it may be found that an investor in a wildcat
oil well who incurs very substantial expenditures is in the
venture for profit even though the expectation of a profit might
be considered unreasonable.”)
The possibility of a speculative profit becomes less
speculative when a taxpayer shows he actually realized a profit
in years subsequent to those at issue. See Hillman v.
Commissioner, T.C. Memo. 1999-255; Hoyle v. Commissioner, T.C.
Memo. 1994-592. Here, petitioner’s efforts to bring his gold
mining activity to profitability were succeeding; his net losses
from Brown Enterprises decreased each year until 2000, when he
reported a small profit. His uninterrupted path to profitability
supports the conclusion that he had a bona fide profit objective
during the years in issue.
8. Petitioners’ Financial Status
The fact that the taxpayer does not have substantial income
or capital from sources other than the activity in question may
indicate that the activity is engaged in for profit. Sec. 1.183-
2(b)(8), Income Tax Regs. Substantial income from sources other
than the activity (particularly if the losses from the activity
generate substantial tax benefits) may indicate a lack of profit
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