James R. and Myrtice L. Peacock - Page 25

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               vi.  An Activity’s History of Income and/or Losses                     
               A series of losses beyond the startup stage may be                     
          indicative of the absence of a profit motive unless the losses              
          can be blamed on unforeseen or fortuitous circumstances beyond              
          the taxpayer’s control.  Sec. 1.183-2(b)(6), Income Tax Regs.               
               Petitioners argue that this factor weighs in their favor.              
          We disagree.  Notwithstanding that their tournament winnings                
          totaled almost $500,000 in 1994 through 1997, PMSI reported                 
          losses from the fishing activity of $168,042 for 1994, $270,755             
          for 1995, $307,016 for 1996, and $249,181 for 1997.  In total,              
          PMSI incurred almost $1.5 million of expenses to win                        
          approximately $500,000, producing an approximate loss of $1                 
          million.  The record, moreover, contains no credible evidence to            
          suggest that PMSI ever expected to recoup any of these losses.              
          The fact that the fishing activity suffered losses year after               
          year and that petitioners took no meaningful action to reverse              
          the tide supports a finding that they were indifferent as to                
          whether the losing trend could be reversed.  Ranciato v.                    
          Commissioner, 52 F.3d 23, 25-26 (2d Cir. 1995), vacating T.C.               
          Memo. 1993-536.  Although it is true that petitioners aspired in            
          the tournaments to win large cash prizes, the mere fact that they           
          so aspired and were qualified to win those prizes does not mean             
          that PMSI entered into the fishing activity with the requisite              
          profit objective.  This factor favors respondent.                           

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