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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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