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A history of substantial losses indicates that the taxpayer
did not conduct the activity for profit. Sec. 1.183-2(b)(6),
Income Tax Regs. Petitioner started filing a Schedule C with his
Federal income tax return for the 1997 tax year with regard to
the bass fishing activity. The Court cannot ignore the fact that
petitioner realized only nominal gross receipts and never
realized a profit from the activity over the period from 1997 to
2001 and thereafter. Instead, petitioner’s bass fishing activity
generated an average loss of $7,831.60 each year from 1997 to
2001. More importantly, petitioner seemed unconcerned about
minimizing his expenses when he stated at trial: “when you say
what the prize monies are, how much that you can win, versus --
my expenses, I’m not minimizing those, but again they’re
relatively small. This is * * * not huge numbers here that the
taxpayer’s taking a hit on.” A taxpayer does not generally enter
into a recreational activity to generate income in excess of
deductions. Petitioner’s choice to continue sustaining losses
suggests the lack of a profit objective.
The amount of occasional profits, if any, which are earned
is also considered in the determination of whether an activity is
not engaged in for profit. Sec. 1.183-2(b)(7), Income Tax Regs.
Although petitioner has had some gross receipts in connection
with the activity, his expenses have always exceeded this income,
resulting in net losses each year. By participating only in
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Last modified: May 25, 2011