Lucian T. Baldwin, III - Page 31

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               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.                  

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