Claude D. Mayo, Sr. and Lessie M. Mayo - Page 7

                                        - 6 -                                         
          See Cannon v. Commissioner, 949 F.2d 345, 350 (10th Cir. 1991),             
          affg. T.C. Memo. 1990-148.                                                  
               Petitioners presented no evidence concerning many of the               
          factors contained in the regulations.  While petitioner claims              
          that he maintained books and records, he did not produce any                
          records at trial.  He could not explain the $16,310 deduction               
          claimed for supplies in 1995, and he could not explain the                  
          components of the $22,494 deduction for other expenses in 1996.             
          While people may not normally associate trading in used cars as a           
          recreation, we do recognize that some people do get a certain               
          pleasure from repairing cars.                                               
               But, what concerns us more is the history of losses.  While            
          a person may start out with a bona fide expectation of profit,              
          even if it is unreasonable, there is a time when, in light of the           
          recurring losses, the bona fides of that expectation must cease.            
          See Filios v. Commissioner, 224 F.3d 16 (1st Cir. 2000), affg.              
          T.C. Memo. 1999-92.  This is particularly pertinent here where              
          petitioner could not estimate when the activity might become                
          profitable.  Moreover, there is nothing in the record to                    
          reasonably suggest that the activity, as petitioner operated it             
          during the years in issue, had been, or would ever be,                      
          profitable.                                                                 
               We are also concerned that there is no evidence that                   
          petitioner, despite losses of more than $79,000 from 1993 to                






Page:  Previous  1  2  3  4  5  6  7  8  9  10  Next

Last modified: May 25, 2011