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20. Petitioners felt that whether they would be able to
resell the Diane for a profit “was a question mark”.
21. During 1991, 1992, and 1993, the 3 years immediately
prior to the years in issue, Diane Racing sustained almost
$400,000 in total losses compared with approximately $21,000 of
income--i.e., Diane Racing’s losses were approximately 19 times
larger than its income.
22. Petitioners reported the following amounts of wages on
their income tax returns: $550,770, $614,623, $529,342, and
$487,315 for 1994, 1995, 1996, and 1997, respectively.
23. Even after subtracting the losses associated with the
yacht racing activity, petitioners reported the following amounts
of total income on their income tax returns: $476,552, $518,472,
$519,354, and $471,541 for 1994, 1995, 1996, and 1997,
respectively.
24. Petitioners considered sailing a family activity.
25. Dr. Schwartz and petitioners’ children sailed the
Diane.
26. Dr. Schwartz enjoyed sailing.
Although in Schwartz I we concluded that petitioners proved
that the yacht racing activity was engaged in with an actual and
honest objective of making a profit, on the basis of the evidence
it was reasonable for respondent to believe that the Court could
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