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7. The Amount of Occasional Profits, If Any, Which Are
Earned
We next consider the amounts of occasional profits, if any,
petitioner earned. Occasional profits the taxpayer earned from
the activity, in relation to the amount of losses incurred, the
amount of the taxpayer’s investment, and the value of the assets
used in the activity provide useful criteria in determining the
taxpayer’s intent. Sec. 1.183-2(b)(7), Income Tax Regs. A
practical possibility that a taxpayer could earn enough money in
a year to exceed expenses also can indicate a profit objective.
Bolt v. Commissioner, 50 T.C. 1007, 1014 (1968).
Petitioner obtained a substantial sponsorship in 1998 and
expected the sponsorship to continue during the years at issue.
Petitioner incurred one-time costs related to the sponsorship in
1998, such as painting the sponsor’s logo on his car, but did
make a small profit during that year.
Respondent contends that petitioner would have had a net
loss even with a $15,000 sponsorship during the years at issue.
We do not give respondent’s hypothetical situation great weight.
Petitioner organized his affairs during the years at issue around
the reality that he did not have a sponsor. If petitioner had
had a sponsor during the years at issue, his income and expenses
might have been considerably different. Petitioner might have
competed in more races (incurring more entry fees but also
creating more opportunities to win prize money) to gain more
exposure for his sponsor. In fact, petitioner’s 1999 budget
projection with a $15,000 sponsorship and $5,000 race winnings
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