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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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