James R. and Myrtice L. Peacock - Page 26

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               vii.  Amounts of Occasional Profits                                    
               Occasional profits may indicate a profit motive.  The                  
          absence of profits, however, is not determinative of a lack of              
          profit motive.  Petitioners need only have an actual and honest             
          profit objective.  Absent actual profits generated from the                 
          activity, an opportunity to earn a substantial ultimate profit in           
          a highly speculative venture may be sufficient to indicate that             
          the activity is engaged in for profit.  Sec. 1.183-2(b)(7),                 
          Income Tax Regs.  “Profit” means economic profit independent of             
          tax consequences.  Antonides v. Commissioner, 91 T.C. 686,                  
          693-694 (1988), affd. 893 F.2d 656 (4th Cir. 1990); Dreicer v.              
          Commissioner, 78 T.C. at 644-645.                                           
               The fishing activity has never earned a profit, and                    
          petitioners have not persuaded us that PMSI had a chance either             
          to make a profit or to recoup their losses.  Whereas petitioners            
          testified that the nonoccurrence of three misfortunes would have            
          resulted in PMSI’s reporting a profit for each subject year, we             
          are unpersuaded that such would have been the case.  Among other            
          things, we are unpersuaded that petitioners would have won the              
          claimed amounts of money had the misfortunes not occurred.  The             
          record lacks any objective evidence to establish the specific               
          prizes which petitioners would have won had those misfortunes not           
          occurred, or the net amount of those prizes which would have                

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