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The regulations under section 183 provide a nonexclusive
list of factors to be considered in determining whether an
activity is engaged in for profit. The factors include: (1) The
manner in which the taxpayer carries on the activity; (2) the
expertise of the taxpayer or his or her advisers; (3) the time
and effort the taxpayer expended in carrying on the activity; (4)
the expectation that assets used in the activity may appreciate
in value; (5) the taxpayer’s success in carrying on other
activities; (6) the taxpayer’s history of income or loss with
respect to the activity; (7) the amount of occasional profits, if
any, which are earned; (8) the taxpayer’s financial status; and
(9) whether elements of personal pleasure or recreation are
involved. Sec. 1.183-2(b), Income Tax Regs; see also Golanty v.
Commissioner, supra.
On the basis of the totality of the evidence in the record,
we conclude that for the years in issue, petitioner had a good
faith expectation of profit from his Schedule C activity. In
reaching this conclusion, we view the following factors as being
particularly persuasive: Petitioner carried on his activity in a
businesslike manner, keeping, as respondent acknowledges on
brief, “fairly extensive financial records for his Schedule C
activity.” Petitioner responded to JJT’s lack of profitability
in earlier years by developing a successful business plan to
expand JJT’s undertakings into producing photography exhibitions.
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Last modified: May 25, 2011