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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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