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is neutral. See Strickland v. Commissioner, T.C. Memo. 2000-309;
Davis v. Commissioner, T.C. Memo. 2000-101.
7. Amount of Occasional Profits, If Any
The amount of any occasional profits the taxpayer earned
from the activity may show that the taxpayer had a profit
objective. See sec. 1.183-2(b)(7), Income Tax Regs.
Petitioners’ tree farm generated no profit during the years in
issue and showed a small profit in 1998. This factor is neutral.
8. Financial Status of the Taxpayer
The receipt of a substantial amount of income from sources
other than the activity, especially if the losses from the
activity generate large tax benefits, may indicate that the
taxpayer does not intend to conduct the activity for profit. See
sec. 1.183-2(b)(8), Income Tax Regs.
Petitioners had $102,222 in unrelated gross income for 1994
and $110,432 for 1995, and claimed Schedule F losses of $28,080
and $16,699, respectively. Although petitioners had income
against which they deducted their losses, they did not realize
substantial tax benefits from the tree farm activity. Of their
losses, depreciation accounted for only 12.6 percent in 1994 and
19.4 percent in 1995; most of their losses were from cash
outlays. See Davis v. Commissioner, supra (the fact that the
taxpayers spent 40-50 percent of their income on the activity and
that depreciation accounted for only 9-17.5 percent of their
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