- 19 - is not entitled to the claimed deductions, we explain why applying an economic analysis based on the projected future cashflows of the partnership further supports our finding. We have previously used a present value analysis in similar situations to determine whether an activity was engaged in for profit within the meaning of section 183. See Soriano v. Commissioner, 90 T.C. at 54-57; Gianaris v. Commissioner, supra; Keenan v. Commissioner, T.C. Memo. 1989-300. For example, in Gianaris, we examined the economic projections and income assumptions of a partnership engaged in a similar EMS-related activity and found that there was no reasonable possibility of a profit independent of tax considerations because the discounted cashflows (disregarding tax considerations) would have been negative. We explained the use of a present value analysis to determine profit objective as follows: Generally, a financial investment will require one or more cash payments and will produce one or more cash returns. Net present value (net cash-flow) is the sum of the initial investment (a negative cash-flow) plus the present values of future cash-flows (which may be either negative or positive). If net present value is positive, the investment is profitable, and a profit- seeking investor would pursue it. If net present value is zero, the investment is neither profitable nor unprofitable, and a profit-seeking investor would be indifferent to it. If net present value is negative, the investment is unprofitable, and a profit-seeking investor would avoid it. [Id.; fn. refs. omitted.]Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Next
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