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None of the assets used in petitioner’s bass fishing
activity are likely to appreciate in value, and, for that matter,
petitioner did not accumulate any assets with the expectation
that they would appreciate in value. Sec. 1.183-2(b)(4), Income
Tax Regs.
A taxpayer’s previous success in other entrepreneurial
activities similar or dissimilar to the activity in question may
indicate that a profit objective exists. Sec. 1.183-2(b)(5),
Income Tax Regs. Petitioner experienced some financial success
with Fayette, a school supply company that he formed in 1977 and
operated through 1987. More notable, however, are petitioner’s
entrepreneurial activities associated with the bass fishing
activity at issue. Petitioner completely terminated Sportsman’s
Supply, a retailer of sporting goods and fishing tackle, when the
entity failed to generate net earnings in its first 2 years of
operation. Similarly, petitioner created a Web site in the hope
of enhancing profitability yet abandoned this project when the
site did not produce anticipated activity. Even though
petitioner’s bass fishing activity has never generated net
earnings, he has nevertheless continued the activity since 1997.
Given petitioner’s history of promptly ending unprofitable
business ventures, his unwillingness to cease tournament bass
fishing, an activity that produced losses exclusively, indicates
that the bass fishing activity was not engaged in for profit.
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Last modified: May 25, 2011