Lucian T. Baldwin, III - Page 48

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          engaged in for profit under section 183 and that, therefore, he             
          properly disallowed BAC’s expenses and recomputed BAC’s income.             
          Petitioner asserts that BAC was operated as a trade or business             
          and that its profit motive is demonstrated by a variety of                  
          factors, including BAC’s effect on the increased profitability of           
          petitioner’s related businesses.                                            
                    1.   Activity Not Engaged in for Profit                           
               We have already reviewed the relevant law governing our                
          analysis under sections 162 and 183 in connection with our                  
          holding regarding petitioner’s deductions of LFI’s losses.  We              
          shall not repeat that discussion here.  We turn, instead, to our            
          analysis of whether BAC was a trade or business under section 162           
          or an activity not engaged in for profit under section 183.                 
               In support of his argument that BAC engaged in its air                 
          transportation activity for profit, petitioner contends that BAC            
          maintained adequate business records, periodically consulted with           
          and relied upon experts to operate the activity and to improve              
          its finances, and regularly increased the per-person fees charged           
          to its customers to improve its cashflow.  Respondent contends              
          that BAC was nothing more than a convenient and tax-favorable way           
          for petitioner and his family, friends, and business                        
          acquaintances to travel to and from Granot Loma and other                   
          vacation sites.  Respondent relies primarily upon BAC’s history             
          of substantial losses in each of the years at issue, petitioner’s           

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