James R. and Myrtice L. Peacock - Page 24

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          that the assets used in an activity may appreciate in value.  The           
          potential for asset appreciation is usually associated with land            
          and other tangible assets.                                                  
               Petitioners make no argument as to this factor.  Nor have              
          they offered any evidence that indicates that any assets used in            
          the fishing activity would appreciate in value.  This factor                
          favors respondent.                                                          
               v.  Taxpayer’s Success in Similar or Dissimilar Activities             
               Although an activity is unprofitable, the fact that a                  
          taxpayer has previously converted similar activities from                   
          unprofitable to profitable enterprises may show a profit intent             
          with respect thereto.  Sec. 1.183-2(b)(5), Income Tax Regs.                 
               Petitioners argue that this factor weighs in their favor.              
          We disagree.  Although Mr. Peacock has been a successful                    
          entrepreneur in the automobile industry, the record does not                
          reveal that his work in that industry had any bearing on                    
          petitioners’ ability to conduct PMSI’s fishing activity                     
          profitably.  Moreover, the record reveals that petitioners                  
          conducted the fishing activity as a means to participate jointly            
          in a recreational and social pursuit.  In fact, PMSI terminated             
          the activity when Ms. Peacock was no longer able to participate             
          in it.  This factor favors respondent.                                      

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Last modified: May 25, 2011