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In this case, petitioner’s losses in comparison with his
revenues are substantial. From 1980 through 1991, petitioner did
not report any income from his mining activities, and from 1989
through 1991, petitioner reported $723,656 in net losses. From
1992 through 1999, petitioner reported a total of $537,800 in
revenue and $3,347,724 in losses.
This factor favors respondent’s position.
7. The Amount of Occasional Profits Generated
by the Activity
The amount of profits earned in relation to the amount of
losses incurred, the amount of the investment, and the value of
the assets in use may indicate a profit objective. See sec.
1.183-2(b)(7), Income Tax Regs. Profit means economic profit,
independent of tax savings. See Drobny v. Commissioner, 86 T.C.
1326, 1341 (1986); Seaman v. Commissioner, 84 T.C. 564, 588
(1985).
Petitioner conceded on brief that he did not realize any
economic profit until 1999 and only began generating “meaningful
revenue” in 1997.22 Petitioner contends, however, that section
1.183-2(b)(7), Income Tax Regs., best describes his mining
22During the years at issue in this case, petitioner
reported over $1.6 million in costs and expenses related to his
mining activities and only $2,800 of revenue. In the subsequent
5 years, however, petitioner reported $535,000 in revenue and
approximately $2.2 million in costs and expenses. In 1999,
petitioner’s revenue of $373,566 surpassed his operating costs
and expenses of $322,328, exclusive of depreciation.
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