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2(b)(9), Income Tax Regs. Profit need not be the only objective,
however, and personal motives may coexist with an actual and
honest intent to derive a profit. Id. Although petitioner was
personally interested in these activities, we do not find that
personal pleasure or recreation was a primary motive in carrying
out these activities. This factor favors petitioners.
Conclusion
We are convinced that petitioner engaged in certain
activities in the mental health field, that he held an interest
in and dedication to them, and that he devoted time to these
endeavors. However, based on the objective facts in this case,
as discussed above in connection with the individual factors, we
must conclude that petitioner did not have an actual and honest
objective of earning a profit in these activities. Sec. 1.183-
2(a), Income Tax Regs. We therefore sustain respondent’s
determination with respect to the mental health services activity
and the developmental research activity.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered for
respondent with respect to the
deficiencies and for petitioners
with respect to the penalties.
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