-14-
1981); sec. 1.183-2(b)(6), Income Tax Regs. Losses during the
initial or startup stage of an activity do not necessarily
indicate, however, that the taxpayer did not conduct the activity
for profit, but losses that continue to be sustained beyond the
period that is customarily necessary to bring the operation to
profitable status may indicate the taxpayer did not engage in the
activity for profit. Engdahl v. Commissioner, 72 T.C. at 668;
sec. 1.183-2(b)(6), Income Tax Regs. Abandoning an activity
after indications that the activity will be unprofitable
signifies that the taxpayer engaged in the activity for profit.
Canale v. Commissioner, T.C. Memo. 1989-619.
Petitioner has not shown a profit from her gambling activity
for the 3 years before and the year after the year at issue.
Petitioner persisted in the activity despite the ongoing pattern
of losses, although she did change her strategy to some extent.
This factor favors respondent.
Amount of Occasional Profits, If Any, Which Are Earned
We next consider the amounts of occasional profits, if any,
that petitioner earned. Occasional profits the taxpayer earned
from the activity, in relation to the amount of losses incurred,
the amount of the taxpayer’s investment, and the value of the
assets used in the activity provide useful criteria in
determining the taxpayer’s intent. Sec. 1.183-2(b)(7), Income
Tax Regs. A practical possibility that a taxpayer could earn
enough money in a year to exceed expenses also can indicate a
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