Austin L. Mitchell and Rebecca A. Mitchell - Page 21

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          disagree.  Petitioner received $7,500 in exchange for mature                
          timber harvested from the family farm in 1999.  If petitioner had           
          sold the timber in some other year, he possibly would have had a            
          net profit then from which we would have drawn the same favorable           
          inference.  Petitioner’s net profit in 1999 is not diminished               
          because he could have realized it in another year.                          
               Petitioner also contends that this factor should favor him             
          because he showed a net profit in 2001, 2003, and 2004.  We place           
          no weight on events that arose after 2000.  This factor is                  
          neutral.                                                                    
               8.   The Taxpayer’s Financial Status                                   
               We next examine petitioner’s 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 from the                  
          activity generate large tax benefits, may indicate that the                 
          taxpayer is not conducting the activity for profit.  Id.                    
          Substantial income is, in this analysis, income well in excess of           
          that which is needed by the average taxpayer to meet ordinary               
          living expenses.  See Bessenyey v. Commissioner, 45 T.C. at 274.            
          Taxpayers with substantial income from other sources have a                 







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