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The fact that the Commissioner loses on the merits or
concedes the case does not establish that a position was not
substantially justified; however, it is a factor to be
considered. Powers v. Commissioner, 100 T.C. 457, 471 (1993),
affd. in part and revd. in part on another ground 43 F.3d 172
(5th Cir. 1995).
In Schwartz I, after an analysis of the facts of the case
under the factors provided in section 1.183-2(b), Income Tax
Regs., we held that the yacht racing activity was engaged in with
an actual and honest objective of making a profit. The
stipulated facts, exhibits, and testimony, however, contained
many facts that supported a finding that the yacht racing
activity was not engaged in with an actual and honest objective
of making a profit.
Some of these stipulated facts were:
1. Petitioners did not prepare or review comparison charts
or consider any other models before purchasing the Diane.4
2. Record ownership of the Diane has never been in the
name of Diane Racing.
3. In 1996, record ownership of the Diane was transferred
from Robert Schwartz to Robert and Diane Schwartz.
4 All references to the Diane are to the Nelson Marek
racing sailboat used in the yacht racing activity.
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Last modified: May 25, 2011