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expertise of the taxpayer or his advisers; (3) the time and
effort expended by the taxpayer in carrying on the activity; (4)
the expectation that the assets used in the activity may
appreciate in value; (5) the success of the taxpayer in carrying
on other similar or dissimilar activities; (6) the taxpayer’s
history of income or losses with respect to the activity; (7) the
amount of occasional profits, if any, that are earned; (8) the
financial status of the taxpayer; and (9) the elements of
personal pleasure or recreation involved in the activity.
Having considered the factors listed in section 1.183-2(b),
Income Tax Regs., we hold that petitioners actually and honestly
intended to make a profit in the activity. Consequently, section
183 does not limit the deductions claimed by petitioners with
respect to the activity.2
Respondent contends that because petitioners have incurred
losses relating to the activity in each year, they did not have
the requisite profit objective. To the contrary, petitioners
honestly and actually believed that they would recoup their
2 Pursuant to sec. 7491(a), petitioners have the burden of
proof unless they introduce credible evidence relating to the
issue that would shift the burden to respondent. See Rule
142(a). Our conclusions, however, are based on a preponderance
of the evidence, and thus the allocation of the burden of proof
is immaterial. See Estate of Bongard v. Commissioner, 124 T.C.
95, 111 (2005).
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Last modified: November 10, 2007