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unprofitable. Sec. 1.183-2(b)(5), Income Tax Regs. A taxpayer’s
success in other, unrelated activities also may indicate a profit
objective. See Daugherty v. Commissioner, T.C. Memo. 1983-188
(taxpayer’s diligence, initiative, foresight, and other qualities
that generally lead to success in other business activities
indicate taxpayer had a profit motive for activity at issue).
Petitioners are both extremely successful individuals.
Petitioners grew CFI, the company they founded, into an
organization with over $300 million in sales at its peak. As
majority owners of CFI, petitioners were responsible for
overseeing every aspect of the business, including marketing,
design, coordinating production, employee relations, and numerous
other activities. Petitioners also have been engaged in several
other businesses. For example, Mr. Rabinowitz was involved in a
movie business with Ms. Harrah. At the time of trial,
petitioners co-owned a women’s apparel design and import firm
called Studio CL. The fact that petitioners grew CFI into such a
large organization and have considerable experience in various
business endeavors is evidence of petitioners’ ample business
experience and skills they brought to their jet charter activity.
See id. This factor favors finding petitioners operated the jet
charter activity for profit.
6. The Taxpayer’s History of Income or Loss With Respect
to the Activity
We next examine petitioners’ history of income or loss with
respect to the jet charter activity. A history of substantial
losses may indicate that the taxpayer did not conduct the
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