James J. Hogan - Page 16




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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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