- 16 - 8. The Financial Status of the Taxpayer The fact that a taxpayer does not have substantial income or capital from sources other than an activity may indicate that the activity is engaged in for profit. See sec. 1.183-2(b)(8), Income Tax Regs. The fact that a taxpayer does have substantial income from sources other than an activity, on the other hand, may indicate that the activity is not engaged in for profit. The latter is especially true where losses from the activity generate substantial tax benefits or where there are personal or recreational elements involved. Sec. 1.183-2(b)(9), Income Tax Regs. Petitioner received approximately $229,176 in 1997, $231,587 in 1998, and $276,600 in 1999 in wages from his work as an emergency room physician. Petitioner averaged $244,000 per year as a full-time wage earner over the 3-year tax period. The salary or income for each tax year in question, which petitioner hoped to offset by claimed losses, indicates that the activity is not one engaged in for profit. This factor weighs against petitioner. 9. Elements of Personal Pleasure or Recreation The absence of personal pleasure or recreation relating to the activity in question may indicate the presence of a profit objective. Sec. 1.183-2(b)(9), Income Tax Regs. The mere fact that a taxpayer derives personal pleasure from an activity,Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Next
Last modified: May 25, 2011