Raymond J. and Ilene H. Pavelko - Page 14

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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.                      
               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               
               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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