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appreciated. However, petitioner offered no evidence to support
this claim. We conclude that petitioner’s boat appreciation
claim lacks credibility. The record does not establish that a
fishing boat is the type of asset that is expected to appreciate
over time. This factor favors respondent.
The fact that the taxpayer has engaged in similar activities
in the past and converted them from unprofitable to profitable
enterprises may indicate that he is engaged in the present
activity for profit, even though the activity is presently
unprofitable. Sec. 1.183-2(b)(5), Income Tax Regs. Petitioner
argues that his architectural business has earned a profit every
year. However, there is nothing in the record to suggest that
petitioner’s architectural activities are related to petitioner’s
fishing activity. The similar profitable activities factor
favors respondent.
A record of substantial losses over several years may
indicate the absence of a profit motive. Golanty v.
Commissioner, 72 T.C. 411, 426 (1979), affd. without published
opinion 647 F.2d 170 (9th Cir. 1981). A series of losses during
the initial or startup stage of an activity, however, may not
necessarily be an indication that the activity is not engaged in
for profit. Sec. 1.183-2(b)(6), Income Tax Regs. Moreover, if
losses are sustained because of unforeseen or fortuitous
circumstances which are beyond the control of the taxpayer, such
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Last modified: November 10, 2007