- 31 -
The only activity allegedly conducted by LFI that warrants
detailed examination under sections 162 and 183 is the alleged
rental of the lodge. Beginning in 1989 and continuing throughout
the remaining years at issue, LFI billed one of petitioner’s
other companies for every night spent at Granot Loma by
petitioners and their family, friends, and business
acquaintances.16 LFI arguably conducted this activity, variously
characterized by petitioner as a rental business or as the
operation of a corporate retreat or lodge, with sufficient
continuity and regularity from 1989 through at least 1992 that an
examination of whether the activity was conducted with the intent
to make a profit is appropriate. In making the examination, we
apply the factors of section 1.183-2(b), Income Tax Regs.
The factors on which petitioner primarily relies in support
of his argument that petitioner’s and LFI’s use of Granot Loma
was an activity for profit are the manner in which petitioner and
LFI operated Granot Loma, the expertise of petitioner and his
advisers, the amount of time and effort petitioner devoted to
Granot Loma, and petitioner’s expectation that Granot Loma would
appreciate in value and ultimately be sold at an economic profit.
The factors on which respondent primarily relies in support
16In 1990, after petitioner’s accountant raised concerns
about LFI’s ability to withstand scrutiny under sec. 183,
petitioner arranged for Granot Loma’s caretaker to bill for each
time petitioner, his family, and his guests stayed overnight at
Granot Loma during 1988, 1989, and the early part of 1990.
Page: Previous 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 NextLast modified: May 25, 2011