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experts. Nor did petitioner consult with business experts during
the regular course of operations for the bed and breakfast. It
appears over the course of the activity that petitioner gained
little expertise regarding the business aspects and profitability
of a bed and breakfast activity. Petitioner claimed he went into
the bed and breakfast activity to cover his additional expenses
from his divorce, yet he only had losses. We conclude that this
factor is not indicative of a profit objective.
We consider the time and effort expended by the taxpayer in
carrying on the activity. An intent to derive a profit may be
demonstrated by a taxpayer who devotes much of his personal time
and effort to the activity, a taxpayer who withdraws from another
occupation to devote most of his energies to the activity, or a
taxpayer who devotes a limited amount of time but employs
competent and qualified people to carry on the activity. Sec.
1.183-2(b)(3), Income Tax Regs.
During the taxable years in issue, petitioner worked full-
time as an elementary school principal. Petitioner’s official
workday was from 8 a.m. to 4 p.m. Petitioner would also have
early morning meetings and after-school activities. Petitioner
stated that his work days as principal varied but that there were
“times I’d feel like I was putting in a 16 hour day.” During the
1997 taxable year, petitioner also claimed he operated a
woodworking business. Ms. Hughes was also employed full-time as
a school psychologist. Petitioner does not contend that any
other individuals were employed by the Camelot Inn. Most
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Last modified: May 25, 2011