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Additionally, petitioners were unable to obtain sponsors
because of the dissolution of the Association, petitioners lost
their two main charterers when one went bankrupt and one died,
and petitioners were distracted by Mr. Schwartz’s surgery,
malpractice suits, and their loss of savings due to a bad pension
administrator.
Amount of Occasional Profits From the Activity
An opportunity to earn a substantial ultimate profit in a
highly speculative venture is ordinarily sufficient to indicate
that the activity is engaged in for profit even though losses or
only occasional small profits are actually generated. Sec.
1.183-2(b)(7), Income Tax Regs. We conclude that petitioners had
an opportunity to ultimately profit from the activities
associated with the Diane even though losses were actually
generated. For example, petitioners expected to make an overall
profit with the resale of the Diane because they purchased the
Diane for half its then market value, they attempted to lower
expenses related to the Diane, and they had experience reselling
their other sailboats at a profit. The fact that losses were
actually generated was caused by factors beyond petitioners’
control rather than petitioners’ lack of effort.
Financial Status of Petitioners
We conclude that petitioners’ financial status during the
years in issue indicates that the activity was engaged in for
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