-31-
through the relevant years, even with the unforeseen safety
problems.
Notwithstanding this trend, it is uncertain whether
petitioners ever would have earned a profit from the jet charter
activity because of the significant fixed costs involved. This
factor does not support petitioners’ contention that they engaged
in the jet charter activity for profit.
8. The Financial Status of the Taxpayer
We next examine petitioners’ financial status. If a
taxpayer does not have substantial income or capital from sources
other than the activity in question, it may indicate that the
taxpayer engages in the activity for profit. Sec. 1.183-2(b)(8),
Income Tax Regs. Conversely, substantial income from sources
other than the activity, especially if the losses generate large
tax benefits, may indicate that the taxpayer is not conducting
the activity for profit. Id. Taxpayers with substantial income
from other sources have a much greater tax incentive to incur
large expenditures in a hobby type of business. Jackson v.
Commissioner, 59 T.C. 312, 317 (1972). The fact that a taxpayer
has substantial income from other sources does not, however,
foreclose a profit motive if the facts and circumstances indicate
a taxpayer engaged in the activity for profit. Wheeler v.
Commissioner, T.C. Memo. 1999-56. It is just one factor. See
id.
Petitioners had substantial income from CFI that the jet
charter losses could and did offset. Petitioners reported
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