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against finding a profit objective.
We consider the financial status of the taxpayer.
Substantial income from sources other than the activity in
question, particularly if the losses from the activity generate
substantial tax benefits, may indicate that the activity is not
engaged in for profit. Hillman v. Commissioner, T.C. Memo. 1999-
255; sec. 1.183-2(b)(8), Income Tax Regs. During the taxable
years 1996 and 1997, petitioner reported unrelated gross income
of $67,414 and $65,295, respectively. During the same years,
petitioner reported Schedule C losses from the bed and breakfast
activity of $55,132 and $47,969, respectively. Petitioner used
these losses to reduce his gross income by 82 percent for 1996
and 74 percent for 1997. These reductions led to substantial tax
savings for petitioner. Consequently, this factor weighs against
a finding of a profit objective.
Given due consideration to the record as a whole, we find
that during the taxable years in issue petitioner did not operate
the bed and breakfast activity with an intent to make a profit.
Accordingly, we sustain respondent’s disallowance of petitioner’s
Schedule C deductions.
We next consider whether petitioner is entitled to head of
household filing status for 1996 and 1997. Petitioner contends
that he maintained a household for his daughter Jamie during the
taxable years 1996 and 1997. Respondent determined that
petitioner’s proper filing status for the taxable year at issue
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