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Petitioners assert that for 1995, 1996, and 1997, petitioner
and SMSM had an actual profit objective relating to ownership and
charter of the Feadship. Petitioners assert that petitioner’s
and SMSM’s profit objective involved a continuation of the plan
petitioner adopted in 1990 when petitioner first purchased and
started restoration work on the Feadship and that that profit
objective expanded in 1995, 1996, and 1997 to include the charter
of the Feadship while the Feadship was offered for sale.
Respondent does not dispute that in 1990, when petitioner
purchased the Feadship, petitioner may have had a vague plan and
objective of making some repairs and then, within a short period
of time, of reselling the Feadship for profit. Respondent
argues, however, that over the course of the early 1990s,
petitioner’s costs of restoring the Feadship became so exorbitant
that by 1995 it had become clear to petitioner, and to anyone
else associated with the Feadship, that a profit would not be
realized either on the charter or on the sale of the Feadship.
Respondent therefore argues that the claimed 1995, 1996, and 1997
expenses and losses relating to restoration, charter, and sale of
the Feadship should not be allowed.
We resolve the issues presented largely by applying the
factors set forth in the regulations under section 183.
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