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5. Taxpayer's Success in Other Activities
The fact that a taxpayer previously engaged in similar
activities and made them profitable may show that the taxpayer
has a profit objective. See sec. 1.183-2(b)(5), Income Tax Regs.
The record does not show how petitioner was involved in his
parents’ tree farm or if they operated it successfully. Thus,
petitioner has not established that he successfully engaged in
any other activity similar to the tree farm. This factor favors
respondent.
6. Taxpayer's History of Income or Losses
A history of substantial losses may indicate that the
taxpayer did not conduct the activity for profit. See Golanty v.
Commissioner, supra at 427; sec. 1.183-2(b)(6), Income Tax Regs.
A taxpayer may have a profit objective even when the activity has
a history of losses, see Bessenyey v. Commissioner, supra at 274,
because losses during the initial stage of an activity do not
necessarily indicate that the activity was not conducted for
profit, see Engdahl v. Commissioner, 72 T.C. at 669; sec. 1.183-
2(b)(6), Income Tax Regs.
Petitioners contend that it will take 10-14 years for the
tree farm to be profitable. The years at issue are years 5 and 6
of petitioners' activity. Because petitioners’ losses were
incurred during the startup period of their activity, this factor
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Last modified: May 25, 2011