                        T.C. Memo. 2011-293



                      UNITED STATES TAX COURT



                WAYNE LASIER WILMOT, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 18296-08.              Filed December 22, 2011.



     Wayne Lasier Wilmot, pro se.

     James C. O’Leary, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     MORRISON, Judge:   Respondent (the IRS) issued a notice of

deficiency to petitioner, Wayne Lasier Wilmot (Wilmot),

determining an income-tax deficiency of $14,666 for the year

2004.   The IRS reduced the deficiency to $14,303 after correcting

a computational error in the notice.   Wilmot timely filed a
                                 - 2 -

petition under section 6213(a) for redetermination of the

deficiency.1   We have jurisdiction under section 6214.

     The primary issue for decision is whether Wilmot’s

photography activity was an “activity not engaged in for profit”

within the meaning of section 183.       We find that Wilmot did not

engage in his photography activity for profit.      Thus he cannot

deduct any of the photography expenses he reported.2

                         FINDINGS OF FACT

     Some facts have been stipulated, and they are so found.

Wilmot resided in Maryland when he filed the petition.

     Wilmot earned a B.S. in electrical engineering in 1964 and a

Ph.D. in oceanography in 1972.    From 1972 to 1984, he conducted

oceanographic research at various universities, institutes, and

government agencies; he also taught graduate-level courses.      This

work took place in Scandinavia--primarily in Sweden.




     1
      All section references are to the Internal Revenue Code as
in effect for the year in issue. All Rule references are to the
Tax Court Rules of Practice and Procedure.
     2
      The notice of deficiency reflected that the disallowed
photography deductions increased Wilmot’s income, thus resulting
in computational adjustments to his tuition and fees deduction
and his miscellaneous itemized deductions. Wilmot argues that
his tuition and fees expenses were genuine expenses. But he
misunderstands the IRS’s adjustment. Though he may have incurred
tuition and fees expenses, his modified adjusted gross income (as
increased by the notice of deficiency) exceeds the threshold for
the tuition and fees deduction.
                                 - 3 -

     In 1984, Wilmot returned to the United States and started

Wilmot & Associates, an oceanographic-consulting business.      By

his account, the business was relatively successful.

     In 1985, Wilmot began working full time for the National

Oceanic and Atmospheric Association (NOAA) as an oceanographer.

He also continued his oceanographic-consulting business, Wilmot &

Associates.   By the 1990s, however, Wilmot & Associates was

dormant.

     In 1992, while still working for NOAA, Wilmot earned an M.S.

from Johns Hopkins University.    The degree was in “Technical

Management:   Project Management and Systems Engineering”.

     In 1992, after earning his M.S., Wilmot began teaching part

time at Johns Hopkins while continuing to work at NOAA.3

     In 2001, Wilmot began taking photography classes at

Montgomery College in Rockville, Maryland.     His coursework

included color photography, black-and-white photography,

electronic photography, portrait and fashion photography, and

business practices and portfolio development.

     Around 2001, Wilmot became interested in starting a

photography business.   He hoped to pursue advertising, commercial

photography, and environmental photography.4


     3
      Wilmot generally taught two courses per year--one in the
spring and one in the fall.
     4
      Environmental photography (in Wilmot’s parlance) consists
                                                   (continued...)
                                - 4 -

     In 2002, while working full time for NOAA and part time for

Johns Hopkins, Wilmot began engaging in a photography activity

that he characterized as a for-profit business.    On his tax

returns, he began reporting the expenses from this activity under

the name Wilmot Environmental Technology.    He used the same name

to report expenses from oceanographic consulting, an activity he

resumed in 2002.    For the two years that Wilmot conducted both

photography and oceanographic consulting (2002 and 2003), it is

unclear how much of the expenses he reported for Wilmot

Environmental Technology were oceanographic-consulting expenses.

     In 2004 (the year in issue), Wilmot stopped working as an

oceanographic consultant.    He continued to engage in photography

and remained a full-time employee of NOAA and a part-time

employee of Johns Hopkins.    His combined wages in 2004 from NOAA

and Johns Hopkins totaled $119,127.36.

     In 2004, Wilmot made three trips to Europe to take photos.

He used these trips to build a portfolio--a set of sample photos

that photographers use to seek work.    The first trip took place

from December 17, 2003 to January 21, 2004, the second trip from

March 9 to 22, 2004, and the third trip from July 1 to August 11,

2004.    On the first and second trips, Wilmot took photos



     4
      (...continued)
of taking staged photos of people in their work environments.
These photos are then used in promotional brochures or
advertising.
                               - 5 -

exclusively in the Czech Republic.     On the third trip, he again

took photos in the Czech Republic, but also brought one model,

Hana Strangfeldova, to Sweden for seaside photos.

     During portions of each trip, Wilmot staged multiple all-day

photo shoots.   The shoots consisted of photographing models in

fashionable clothing and swimwear.     In the Czech Republic, the

shoots took place at local photo studios and at various other

locations.   Pavel Danel, a Czech photographer and studio owner,

coordinated the logistics for many of the shoots:    he lent Wilmot

his studio; he provided equipment; and he hired models, makeup

artists, and photo assistants.5   In Sweden, Wilmot and

Strangfeldova stayed at a summer home owned by the family of

Wilmot’s former domestic partner.    Wilmot took seaside photos of

Strangfeldova on the surrounding land and islands.

     After the photo shoots, Wilmot either processed the photos

himself or sent them to a professional lab for processing.       He

then used the photos to compile a portfolio.6

     In 2006, Wilmot earned an associate of applied science

degree in photography from Montgomery College.    He continued




     5
      Wilmot paid Danel for studio and equipment rental. Danel
also set the fees for the models, makeup artists, and photo
assistants (whom Wilmot paid directly) and received a 25-percent
commission on their earnings.
     6
      Wilmot’s portfolio is not in evidence.    Nor are any of his
photos.
                                 - 6 -

engaging in his photography activity until at least 2007.7   He

continued teaching part time at Johns Hopkins until 2009, and he

continued working for NOAA until he retired in 2010.

     On his 2004 tax return, Wilmot claimed $57,691.60 of

photography expenses on Schedule C, Profit or Loss From

Business:8

                       Expense           Amount Claimed
             Car and truck                   $185.00
             Legal and professional
               services                    12,836.26
             Office                        11,048.74
             Repairs and
               maintenance                    247.31
             Supplies                      10,204.33
             Travel                        20,949.86
             Meals and
               entertainment                1,495.95
             Utilities                        724.15
               Total                       57,691.60




     7
      The manner in which Wilmot conducted his photography
activity underwent little change in the years after 2004. As
discussed infra pt. III.A., the only change Wilmot made was a
shift from film to digital photography.
     8
      The Schedule C stated that Wilmot’s principal business was
“consulting & photography”, but as Wilmot testified, the activity
reported on his 2004 Schedule C consisted solely of photography;
thus all his Schedule C expenses in 2004 were photography
expenses.
                                - 7 -

Wilmot reported no gross receipts from his photography activity.

He thus claimed a $57,691.60 Schedule C loss, which reduced his

gross income by $57,691.60.

     At trial, Wilmot submitted into evidence two binders of

documents to substantiate his photography expenses (binder

documents).    The documents include receipts, invoices, ticket

stubs, bank statements, credit card statements, and utility

bills.    They indicate payments for:   books, meals, travel,

lodging, entertainment, women’s clothing, women’s swimwear,

makeup supplies, utilities, photo equipment, storage equipment,

digital equipment, postal services, photographic services, and

miscellaneous items.

     To prepare his 2004 tax return, Wilmot created handwritten

workpapers based in part on the binder documents.     The

handwritten workpapers are not in evidence.     The amounts on

Wilmot’s Schedule C (see table above) did not correspond to the

amounts on the binder documents.    One reason was that he lacked

receipts for some expenses and thus relied on his personal

knowledge of those expenses.    Another reason was that he

sometimes used the U.S. Department of State per diem rates

instead of his actual expenses.

     During audit, Wilmot created Excel spreadsheets that detail

how he calculated his expenses when preparing his 2004 tax

return.    The Excel spreadsheets are electronic versions of the
                               - 8 -

handwritten workpapers that Wilmot used to prepare his 2004 tax

return.   The spreadsheets divide his photography expenses into

categories (the same categories used on his 2004 tax return) and

list the date, payee, amount, and purpose of each expense.

Although we excluded the spreadsheets as hearsay, the parties

agreed to treat the spreadsheets as if Wilmot had testified to

the information contained in them.     We thus ordered that the

spreadsheets be treated as if their information was reflected in

Wilmot’s sworn testimony.

                              OPINION

I.   The Parties’ Positions

     Wilmot contends that he engaged in his photography activity

for profit and is thus entitled to deduct his photography

expenses as business expenses under section 162.     He argues that

the profit-motive factors in section 1.183-2(b), Income Tax

Regs., show that he had a profit motive.     Citing the same

factors, the IRS argues that Wilmot did not engage in his

photography activity for profit.

     The IRS also argues that even if Wilmot intended to earn a

profit from photography, his photography expenses should be

amortized as startup expenses because he was not actively engaged

in a photography activity in 2004.     See secs. 195(a), (b),

(c)(1), 162(a); Jackson v. Commissioner, 86 T.C. 492, 514 (1986)

(no deduction under section 162 unless ongoing business), affd.
                               - 9 -

864 F.2d 1521 (10th Cir. 1989).   We need not address this

argument because, as we explain, we find that Wilmot did not

conduct his photography activity for profit; thus he could not

amortize his expenses as section 195 startup expenses.    See sec.

195(b)(1), (c)(1)(A) (amortization allowed only for expenses

incurred to create new trade or business); Commissioner v.

Groetzinger, 480 U.S. 23, 35 (1987) (profit motive required to

have trade or business).

      Wilmot contends that he gave the IRS full substantiation of

his photography expenses during audit and that the IRS failed to

conduct a “proper audit” of his 2004 tax return.    He requests

that we order the IRS to conduct a complete audit.    But even if

the audit was incomplete, the proper remedy is for us to

determine Wilmot’s correct tax liability.    See, e.g., Greenberg’s

Express, Inc. v. Commissioner, 62 T.C. 324, 327-328 (1974).

      Wilmot also argues that when the IRS audited his 2006 tax

return, it agreed that he had conducted his photography activity

for profit.   But this is irrelevant.   The IRS’s failure to

propose adjustments to one year does not estop it from proposing

adjustments to another year.   See, e.g., Rose v. Commissioner, 55

T.C. 28, 31-32 (1970).

II.   Burden of Proof

      In the notice of deficiency, the IRS determined only that

Wilmot failed to substantiate his photography expenses.    The IRS
                               - 10 -

raised the issue of profit motive before trial, and the parties

agreed to try this issue even though it was not raised in the

notice of deficiency or the answer.     Because the issue was not

raised in the notice of deficiency, the IRS has the burden of

showing, by a preponderance of the evidence, that Wilmot did not

engage in his photography activity for profit.     See Shea v.

Commissioner, 112 T.C. 183, 190-197 (1999) (placing burden of

proof on IRS for new matter tried by consent of parties under

Rule 41(b)); Estate of Gilford v. Commissioner, 88 T.C. 38, 51

(1987) (party satisfies burden of proof by demonstrating merits

of claim by preponderance of evidence).

III. Whether Wilmot Engaged in His Photography Activity for
     Profit

     Under section 183(a),9 no deduction is allowed for an

“activity * * * not engaged in for profit”, except as provided in

section 183(b).10   Section 183(c) defines an “activity not

engaged in for profit” as any activity other than one for which



     9
      Sec. 183 applies only to individuals and S corporations.
Sec. 183(a).
     10
      Sec. 183(b) provides two exceptions, neither of which
applies to Wilmot. Sec. 183(b)(1) allows certain types of
deductions that do not require a profit motive. Sec. 183(b)(2)
allows deductions that would otherwise require a profit motive,
but only to the extent that gross income from the activity
exceeds the total deductions under sec. 183(b)(1). All of
Wilmot’s photography-expense deductions are the type that require
a profit motive, see secs. 162 and 183(c), and he earned no gross
income from his photography activity. Thus he does not qualify
for deductions under sec. 183(b).
                                - 11 -

deductions are allowable under section 162 or 212(1) or (2).

Expenses are deductible under section 162 (the section Wilmot

claims is applicable) only if the taxpayer is engaged in a trade

or business.   In other words, the taxpayer must engage in the

activity continuously and regularly, and the taxpayer’s primary

purpose must be profit.     Commissioner v. Groetzinger, supra at 35

(defining “trade or business”).

      Courts determine whether an activity is engaged in for

profit by examining the facts and circumstances.    Sec.

1.183-2(a), Income Tax Regs.; see also Hendricks v. Commissioner,

32 F.3d 94, 97-98 (4th Cir. 1994), affg. T.C. Memo. 1993-396.

The taxpayer must have a good faith profit motive, but need not

have a reasonable expectation of profit.    Sec. 1.183-2(a), Income

Tax Regs.; see also Hendricks v. Commissioner, supra at 97-98;

Dreicer v. Commissioner, 78 T.C. 642, 645 (1982), affd. without

opinion 702 F.2d 1205 (D.C. Cir. 1983).    In determining profit

motive, “greater weight is given to objective facts than to the

taxpayer’s mere statement of his intent.”    Sec. 1.183-2(a),

Income Tax Regs.; see also Hendricks v. Commissioner, supra at

98.

      Section 1.183-2(b), Income Tax Regs., provides nine factors

that courts typically consider in determining whether an activity

is engaged in for profit:    (1) “Manner in which the taxpayer

carries on the activity”; (2) “The expertise of the taxpayer or
                                - 12 -

his advisors”; (3) “The time and effort expended by the taxpayer

in carrying on the activity”; (4) “Expectation that assets used

in 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,

which are earned”; (8) “The financial status of the taxpayer”;

and (9) “Elements of personal pleasure or recreation”.11    See,

e.g., Hendricks v. Commissioner, supra at 98.

     A.   Manner in Which the Taxpayer Carries On the Activity

     The following facts can indicate a profit motive:     (1) the

taxpayer conducts the activity “in a businesslike manner and

maintains complete and accurate books and records”, (2) the

taxpayer conducts the activity “in a manner substantially

similar” to profitable activities of the same nature, and (3) the

taxpayer attempts to improve the activity’s profitability by

changes in operating methods.    Sec. 1.183-2(b)(1), Income Tax

Regs.; Engdahl v. Commissioner, 72 T.C. 659, 666-667 (1979).

     Wilmot did not conduct his photography activity in a

businesslike manner.   He lacked a separate bank account for the




     11
      These factors are not exclusive, and no one factor is
dispositive. Sec. 1.183-2(b), Income Tax Regs.; Hendricks v.
Commissioner, 32 F.3d 94, 98 (4th Cir. 1994).
                                - 13 -

activity and a written business plan.12    See Keating v.

Commissioner, 544 F.3d 900, 905 (8th Cir. 2008), affg. T.C. Memo.

2007-309.    Although he kept detailed records of his expenses, it

seems he did so solely to substantiate tax deductions.      See id.

(records do not indicate profit motive when kept only to

“memorialize for tax purposes the existence of the subject

transactions”); Bush v. Commissioner, T.C. Memo. 2002-33 (records

do not indicate profit motive if “maintained primarily to support

tax deductions”), affd. without published opinion 51 Fed. Appx.

422 (4th Cir. 2002).    There is no evidence that Wilmot used his

records to make business decisions or improve operations.     See

Golanty v. Commissioner, 72 T.C. 411, 430 (1979), affd. without

published opinion 647 F.2d 170 (9th Cir. 1981).

     Wilmot’s meager efforts at promotion and advertising fall

far short of what the owner of a profitable business would have

done.     See Keating v. Commissioner, supra at 905 (paltry

advertising efforts can indicate lack of profit motive).      Wilmot

relied on word of mouth to promote his activity even though he

had few contacts and no established reputation in the photography

industry.    He claimed that he had contacted several potential



     12
      Wilmot’s “unwritten business plan” was supposedly to build
up his photography activity to provide additional retirement
income. Wilmot also claims that he chose his photo-shoot
locations to lower costs, but there is no written evidence of
cost comparisons. His two binders of documents merely show that
he incurred certain expenses at the locations he chose.
                                - 14 -

clients in 2004, but we find that he contacted only three

potential clients; and of these, only one was a realistic

prospect.13    He even turned down work that he thought

undesirable:    he declined to work on photography jobs with

another Montgomery College student who did personal portraits and

wedding photography.    We are skeptical that a fledgling for-

profit photographer would have behaved this way.

     Wilmot did not make significant efforts to improve

profitability.    Only belatedly did he shift from film to digital

photography.    Even this transition--which ended several years

after 2004--was unlikely to materially improve profitability.

See Golanty v. Commissioner, supra at 431 (operational changes

not meaningful when they cannot significantly improve

profitability).    For clients who preferred digital photography,

Wilmot was still an unknown photographer because he did not

advertise.

     For the above reasons, the manner in which Wilmot conducted

his photography activity does not indicate a profit motive.




     13
      Wilmot could only name three contacts. He interviewed
with an office-workspace company in Rockville, Maryland, but did
not get the job. He also sent unsolicited mailings to Nordstrom
and H&M (two large clothing companies) offering his services.
But we do not believe these mailings created realistic work
opportunities.
                               - 15 -

     B.   The Expertise of the Taxpayer or His Advisors

     Preparation for an activity “by extensive study of its

accepted business, economic, and scientific practices” or by

consultation with experts in these practices may indicate a

profit motive where the taxpayer conducts the activity “in

accordance with such practices”.   Sec. 1.183-2(b)(2), Income Tax

Regs.

     This factor is neutral.   Wilmot’s coursework at Montgomery

College gave him extensive knowledge of photographic techniques.

But he lacked adequate knowledge of the business aspects of

photography.   See Golanty v. Commissioner, supra at 432

(expertise should include knowledge of business aspects of

activity); Giles v. Commissioner, T.C. Memo. 2005-28 (same).     He

testified that his courses at Montgomery College taught him the

business aspects of photography, but only one of these courses

covered business practices.    He also claimed that he had received

advice from professional photographers.   But he received only

general advice on which fields to pursue from a photography

professor at Montgomery College.   And he did not receive business

advice from the other photographers with whom he worked; he

simply paid them for services and studio space.   Even if Wilmot

did glean business knowledge from his courses or from other

photographers, we doubt whether he applied it given his
                               - 16 -

lackluster efforts at cost cutting and promotion.    See supra part

III.A.

     C.   The Time and Effort Expended by the Taxpayer in
          Carrying On the Activity

     If the taxpayer devotes “much of his personal time and

effort” to conducting an activity, this may indicate a profit

motive, particularly if the activity lacks “substantial personal

or recreational aspects”.   Sec. 1.183-2(b)(3), Income Tax Regs.

     This factor is neutral.   Wilmot spent a significant amount

of time on his photography activity.14    The time spent, however,

included substantial personal and recreational aspects, see infra

part III.I., which severely detract from the significance of the

time commitment, see sec. 1.183-2(b)(3), Income Tax Regs.; Giles

v. Commissioner, T.C. Memo. 2006-15.     Wilmot also would have done

many tasks, like taking photos and purchasing equipment,

regardless of whether photography was a hobby or a business.    See

Giles v. Commissioner, T.C. Memo. 2006-15.

     D.   Expectation That Assets Used in Activity May Appreciate
          in Value

     A profit motive may exist if the taxpayer expects that

assets used in the activity will appreciate in value, such that


     14
      Wilmot estimates that he spent 1,520 hours on his
photography activity in 2004, or about 30 hours a week. The IRS
argues that this estimate is implausible. We disagree. As
Wilmot testified, a combination of his annual leave, his
holidays, his flexible work schedule at NOAA, and the seasonal
nature of his work at Johns Hopkins allowed him to devote time to
photography.
                                   - 17 -

even if current income is insufficient to realize a profit, the

activity will generate an overall profit when the assets are

sold.        Sec. 1.183-2(b)(4), Income Tax Regs.

     This factor favors the IRS.       Wilmot testified that his

photos were assets that could appreciate in value and earn him

royalty-like income when leased to stock photography companies,

but we do not find this testimony credible.15         Wilmot admitted

that he did not seriously pursue stock photography.          There is

also no evidence that Wilmot’s photos would appreciate in value.

He never earned any income from his photography activity, and we

have no samples of his work and no credible market-value

estimates; thus we have no way of gauging any potential

appreciation.        See Hendricks v. Commissioner, 32 F.3d at 100

(mere expectation of asset appreciation, without probative

foundation, is insufficient to support profit motive).

        E.      The Success of the Taxpayer in Carrying On Other
                Similar or Dissimilar Activities

        If the taxpayer has profitably conducted similar activities,

this may indicate a profit motive.          Sec. 1.183-2(b)(5), Income

Tax Regs.        This factor favors the IRS.    Although Wilmot

successfully ran an oceanographic-consulting business, the skills

he developed were not readily transferable to a photography



        15
      Stock photography companies acquire photos and let clients
use the photos for a fee. The companies then remit a portion of
this fee to the photographer.
                                 - 18 -

activity.    See, e.g., Giles v. Commissioner, T.C. Memo. 2005-28

(success in dental practice had no bearing on ability to conduct

horse activity).

     F.      The Taxpayer’s History of Income or Losses With Respect
             to the Activity

     If the taxpayer sustains losses beyond the customary startup

period for the activity, this may indicate a lack of profit

motive.     Sec. 1.183-2(b)(6), Income Tax Regs.    Losses during the

startup stage or losses that are explainable “as due to customary

business risks or reverses”, however, might not indicate a lack

of profit motive.     Id.   Losses due to circumstances outside the

taxpayer’s control, such as natural disasters or depressed market

conditions, do not indicate a lack of profit motive.        Id.

     This factor favors the IRS.     Wilmot’s photography losses

generally worsened over the years.        See Golanty v. Commissioner,

72 T.C. at 427.     As reflected in his Schedules C, Wilmot lost

$29,674.63 in 2002, $37,665.79 in 2003, $57,691.60 in 2004 (the

year in issue), $73,066.68 in 2005, $70,971.64 in 2006, and

$69,937.86 in 2007--a 6-year total of $339,008.20 of losses.16

     Wilmot claims that his history of losses is not so severe.

First, he argues that we should not consider losses from 2002 and

2003 because those years precede the year in issue, 2004.         This


     16
      It is possible that the 2002 and 2003 figures reflect some
losses from Wilmot’s consulting activity. But we find that most
of Wilmot’s Schedule C losses for 2002 and 2003 were photography
losses.
                               - 19 -

argument is invalid.   Section 1.183-2(b)(6), Income Tax Regs.,

directs us to examine the “history” of losses, which includes

losses from prior years.    Second, Wilmot argues that we should

not examine years after 2004 (i.e., 2005, 2006, and 2007).    We

need not decide whether these post-2004 years are outside our

frame of reference.    Even without these years, we conclude that

Wilmot’s history of losses suggests he lacked a profit motive.

Three straight years of losses (2002, 2003, and 2004) is

sufficient because the magnitude of the losses far outstrips the

revenue.    See Smith v. Commissioner, T.C. Memo. 1997-503, affd.

without published opinion 182 F.3d 927 (9th Cir. 1999); see also

Miller v. Commissioner, T.C. Memo. 1998-463, affd. without

published opinion 208 F.3d 214 (6th Cir. 2000).    Wilmot earned no

gross receipts, and this poor performance was caused by his

method of operation, not by the newness of his “business”.

     G.     The Amount of Occasional Profits, If Any, Which Are
            Earned

     The earning of substantial profits, even if the profits are

sporadic, generally indicates a profit motive if the taxpayer’s

investment or losses are relatively small.    Sec. 1.183-2(b)(7),

Income Tax Regs.    The mere opportunity to earn a substantial

profit may also indicate a profit motive.    Id.   In contrast, an

occasional small profit generally indicates a lack of profit

motive if the taxpayer’s investment or losses are relatively

large.    Id.
                              - 20 -

     This factor favors the IRS.   Wilmot earned no income from

his photography activity and never made a profit.    See Wesley v.

Commissioner, T.C. Memo. 2007-78 (analogous situation).    He

claims that he persisted in his photography activity because he

hoped to make a profit, but objectively, he had little hope of

the activity ever becoming profitable given his lack of clients,

advertising, reputation, business records, and flexibility

regarding type of work.   See Giles v. Commissioner, T.C. Memo.

2005-28 (hope of speculative profit must be supported by record).

     H.   The Financial Status of the Taxpayer

     If the taxpayer lacks substantial income from sources other

than the activity, this may indicate a profit motive.    Sec.

1.183-2(b)(8), Income Tax Regs.    If, on the other hand, the

taxpayer has substantial income from other sources--particularly

if the losses from the activity generate substantial tax

benefits--this may indicate a lack of profit motive, especially

if the activity involves personal or recreational elements.      Id.

     This factor favors the IRS.   Wilmot earned $119,127.36 in

2004 from his work at NOAA and at Johns Hopkins.    He claimed

$57,691.60 of photography losses, which reduced his gross income

by $57,691.60.   His photography activity also involved personal

and recreational elements, as explained below.   See infra part

III.I.
                               - 21 -

     I.    Elements of Personal Pleasure or Recreation

     The “presence of personal motives” in conducting an activity

may indicate a lack of profit motive, especially if the activity

involves personal or recreational elements.    Sec. 1.183-2(b)(9),

Income Tax Regs.    Making a profit, however, need not be the

taxpayer’s sole objective.    Id.   An activity is not classified as

a hobby simply because the taxpayer finds it pleasurable.

Jackson v. Commissioner, 59 T.C. 312, 317 (1972).

     This factor favors the IRS.    It is true, as Wilmot suggests,

that he did not visit family during his three trips to Europe.

But this fact does not convince us that his photography activity

lacked personal and recreational elements.    First, we believe

that photography had a significant recreational aspect for

Wilmot.    Second, it is difficult to conceive why, if Wilmot did

not enjoy photography, he would continue the activity given its

complete lack of revenue.    See, e.g., Miller v. Commissioner,

supra.    Third, many of Wilmot’s activities involved foreign

travel, dining, and entertainment.17

     J.     Conclusion

     Wilmot did not engage in his photography activity for

profit.    He earned no income from the activity and incurred


     17
      Of the $57,691.60 of photography expenses, $20,949.86 was
for travel, and $1,495.95 was for meals and entertainment.
Wilmot’s receipts indicate that his photography expenses included
a trip to Gröna Lunds Tivoli, a Swedish amusement park, and the
purchase of a Harry Potter DVD in the Czech Republic.
                               - 22 -

increasing losses that he was unlikely to recoup.     He did not

conduct the activity in a businesslike manner or in a manner

similar to a profitable business.     He did not keep records that

helped him make business decisions, nor did he significantly

attempt to improve profitability.     He had no genuine expectation

that his photos would appreciate in value.     His previous success

in oceanography did not increase his odds of success in

photography.   And lastly, he used photography losses to offset

income from other sources and derived substantial pleasure from

traveling and taking photos.     His expertise in photographic

techniques and his large time expenditure are insufficient to

outweigh these factors.   Because we find that Wilmot did not

conduct his photography activity for profit, he cannot deduct any

of his photography expenses under section 162 or section 183.

For this reason, we need not determine whether Wilmot

substantiated his expenses.

     We have considered all arguments, and contentions not

addressed are meritless, irrelevant, or moot.

     To reflect the foregoing,


                                        Decision will be entered

                                   for respondent.
