- 19 -
employment, and he was not willing to give up his gainful
employment to devote more time to gold mining. Petitioner,
therefore, has not shown that a profit was attainable. Cf.
Tinnell v. Commissioner, T.C. Memo. 2001-106 (“occasional
profits” factor favored the taxpayer’s position where objective
facts supported his contention that a profit from a mining
venture was attainable). This factor favors respondent.
The fact that the taxpayer does not have substantial income
or capital from sources other than the activity may indicate that
an activity is engaged in for profit. Substantial income from
sources other than the activity (particularly if the losses from
the activity generate substantial tax benefits) may indicate that
the activity is not engaged in for profit, especially if there
are personal or recreational elements involved. Sec. 1.183-
2(b)(8), Income Tax Regs.
Petitioner supported himself during the years at issue with
wages earned in his primary job as a deck engineer and hydraulic
equipment operator. His wage and unemployment income increased
significantly during these years from $44,631 in 1994, to $75,160
in 1995, and $88,671 in 1996. At the same time, petitioner
reported net losses of $18,164 in 1994, $54,413 in 1995, and
$11,481 in 1996 from his gold mining activity. These losses, in
effect, sheltered substantial amounts of petitioner’s salary and
wage income. This factor favors respondent.
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NextLast modified: May 25, 2011