- 20 -
The presence of personal motives in carrying on an activity
may indicate that the activity is not engaged in for profit,
especially where there are recreational or personal elements
involved. Sec. 1.183-2(b)(9), Income Tax Regs. Petitioner’s
activity was risky, laborious, and time consuming. It involved
back-breaking work, underwater diving for extended periods,
travel, and hauling, operating, and maintaining heavy equipment.
Although petitioner obviously derived some element of enjoyment
from the activity, the small element of personal pleasure did not
outweigh the work element. Enjoyment is not prohibited in an
activity engaged in for profit, and “suffering has never been
made a prerequisite to deductibility.” Jackson v. Commissioner,
59 T.C. 312, 317 (1972). This factor favors petitioner.
On this record, the Court holds that petitioner did not
engage in the activity of gold mining during 1994, 1995, and 1996
with the bona fide objective of making a profit within the intent
and meaning of section 183. Accordingly, petitioner is entitled
to deductions related to the activity only as provided in section
183(b). Respondent is sustained on the principal issue.
The second issue is whether petitioner is entitled to a
deduction of any expenses incurred in connection with his gold
mining activity. In the case of an activity not engaged in for
profit, section 183(b)(1) allows a deduction for expenses that
are otherwise deductible without regard to whether the activity
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