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An occasional small profit from the activity generating large
losses, or from an activity in which the taxpayer has made a
large investment, would not generally be determinative that the
activity is engaged in for profit. However, substantial profit,
though only occasional, would generally be indicative that an
activity is engaged in for profit where the investment or losses
are comparatively small. Moreover, an 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. Sec. 1.183-2(b)(7), Income Tax Regs.
In none of the years that petitioner carried on the activity
did he ever realize a net profit. The record demonstrates an
activity generating large losses without even an occasional
profit. Such evidence does not support the conclusion that the
activity is engaged in for profit.
In addition, the record does not reveal a “an opportunity to
earn a substantial ultimate profit in a highly speculative
venture”. See id. While gold mining is highly speculative,
petitioner presented no evidence of being able to achieve a
substantial ultimate profit. He did not change his methodology
or consult experts to improve his profitability. He believed it
was simply a matter of having more time. Yet he could not devote
more time to the activity because of his other, gainful
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