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racetrack, the evidence does not show whether this was a
successful enterprise or explain why Tony quit it after a short
while.
We conclude that this factor is neutral.
6. History of Income or Losses From Activity
Tony never raced the stock car (apart from the ill-fated
qualifying round), received no cash prizes, and obtained only
minimal sponsorships. Petitioners spent, however, more than
$100,000 on the stock car. Given that Tony was unable to obtain
the sponsorships necessary to make the activity profitable, we
see no possibility that Tony could recoup his expenditures.
This factor favors respondent.
7. Amount of Occasional Profits Earned, if Any
The amount and frequency of occasional profits earned from
the activity may be indicative of a profit objective. Sec.
1.183-2(b)(7), Income Tax Regs. Apart from nominal sponsorships,
Tony’s stock car activity generated no positive cashflows, much
less profits. The “opportunity to earn a substantial ultimate
profit in a highly speculative venture is ordinarily sufficient
to indicate that the activity is engaged in for profit even
though losses or only occasional small profits are actually
generated.” Id. Although Tony’s activity was a “highly
speculative venture”, we are unpersuaded that he ever had an
opportunity to earn a substantial ultimate profit. Although Tony
presumably wanted to win races, “a desire to win prize money is
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