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During the taxable years in issue, neither petitioner nor his
wife earned income from wages. For taxable year 1996,
petitioners reported taxable interest in the amount of $139,778,
dividend income in the amount of $1,832, capital gains in the
amount of $55,488, and taxable Social Security benefits in the
amount of $10,076. For taxable year 1997, petitioners reported
taxable interest in the amount of $93,360, dividend income in the
amount of $865, taxable refunds, credits, or offsets in the
amount of $645, capital gains in the amount of $88,813, rental
real estate income in the amount of $6,251, and taxable Social
Security benefits in the amount of $10,365. For both taxable
years, almost all the taxable interest income and capital gains
income were derived from interest and installment payments of
principal made by the buyers of petitioners’ mobile home park.
As a result of their other income, petitioners realized
substantial tax benefits from the approximate $125,000 loss
deduction for each taxable year in issue.
Finally, in determining profit objective, we consider
whether there are elements of personal pleasure or recreation.
Petitioners owned horses during the taxable years in issue, but
petitioner stated that neither of them rode the horses for
pleasure. Petitioners probably had personal pleasure from
residing on a large ranch.
Although petitioners had the money to purchase the ranch and
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