Jeffrey Tamms - Page 12




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          had begun to implement a plan to improve JJT’s profit-making                
          potential by expanding its undertakings into the production of              
          photography exhibits.  By 1995–-the last year in issue–-                    
          petitioner was reporting small net profits from his Schedule C              
          activities.  In subsequent years, the net profits have increased.           
               Respondent argues that on the basis of the net profits that            
          petitioner has reported for JJT since 1994, it will take an                 
          inordinately long while for petitioner to recoup JJT’s past                 
          losses.  We agree with respondent’s premise that the requisite              
          profit objective must be to “realize a profit on the entire                 
          operation, which presupposes not only future net earnings but               
          also sufficient net earnings to recoup the losses which have                
          meanwhile been sustained in the intervening years.”  Bessenyey v.           
          Commissioner, 45 T.C. 261, 274 (1965), affd. 379 F.2d 252 (2d               
          Cir. 1967).  We are unpersuaded, however, that petitioner’s                 
          profitability will be constrained to the levels reported on his             
          tax returns through 1998.  To the contrary, petitioner testified            
          credibly that he has a business plan to increase the number of              
          exhibitions he produces each year and to decrease his costs, thus           
          increasing his profits from exhibitions, as well as to earn                 
          additional revenues from teaching photography courses and from              
          continuing to offer his prints for sale.                                    
               Seemingly acknowledging that petitioner’s production of                
          photography exhibitions is a for-profit undertaking, respondent             






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