- 15 - 3. Time and Effort Expended in Activity Time and effort expended in carrying on an activity may be indicative of profit motive, particularly in the absence of substantial personal or recreational elements associated with the activity. Sec. 1.183-2(b)(3), Income Tax Regs. During 1992, Tony devoted 100 to 300 hours to his stock car activity. We believe that this time expended is less indicative of a profit motive than of Tony’s love of stock car racing. A taxpayer’s withdrawal from another occupation to devote most of his energies to the activity may evidence a profit motive. Id. Tony testified that he reported to work at CRC every day while conducting his stock car activity. This factor favors respondent. 4. Expectation That Assets May Appreciate in Value On reply brief, petitioners concede that they did not expect Tony’s stock car to appreciate in value. 5. Taxpayer’s Success in Other Activities If the taxpayer has engaged in similar activities in the past and converted them from unprofitable to profitable enterprises, this circumstance may indicate that the activity in question was entered into for profit, even though it is presently unprofitable. Sec. 1.183-2(b)(5), Income Tax Regs. Although Tony had been involved with automobile racing since 1968, the evidence does not indicate that his previous involvement was for profit or profitable. Although Tony and Robert once owned aPage: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
Last modified: May 25, 2011