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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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