                        T.C. Memo. 2007-164



                      UNITED STATES TAX COURT



                 WARREN R. FOLLUM, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7936-03L.             Filed June 25, 2007.



     Warren Richard Follum, pro se.

     James R. Rich, for respondent.



                        MEMORANDUM OPINION


     WELLS, Judge:   Petitioner seeks review, pursuant to section

6320,1 of respondent’s determination to proceed with the

collection of petitioner’s income tax liabilities for the 1990,



     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
                               - 2 -

1991, 1992, and 1993 taxable years.    The issues we must decide

are whether petitioner’s claim that notice and demand for payment

was not sent to his last known address is barred by the doctrine

of res judicata; whether the period of limitations on assessment

of petitioner’s 1990 and 1991 income taxes expired; whether

petitioner engaged in tournament sport fishing with the intent to

make a profit as defined by section 183; and whether the lien may

remain in place.

                            Background

     The parties failed to submit a stipulation of facts but did

stipulate the admission of certain exhibits.    At the time of

filing the petition, petitioner resided in Raleigh, North

Carolina.

     During the years 1990 through 1993, Eastman Kodak Co.

(Kodak) employed petitioner full time in Rochester, New York.

As a full-time employee, petitioner worked at least 40 hours per

week at Kodak.   At the same time, petitioner engaged in the

private practice of architecture between October and May of each

year.

     On Schedules C, Profit or Loss From Business, of his 1990

through 1993 Federal income tax returns, petitioner indicated

that he was engaged in the business of tournament sport fishing
                               - 3 -

and reported the following income and expenses relating to the

tournament sport fishing activity:


  Description           1990     1991     1992     1993     Total

Gross receipts          -0-      -0-      $720     $980    $1,700

Expenses:

  Car/truck           $1,859   $2,247    2,384    1,649     8,139
  Depreciation         4,163   19,083   10,259    5,646    39,151
  Insurance              549      825    1,281      850     3,505
  Mtg. interest        1,928    3,463    3,648    3,526    12,565
  Other interest        -0-       831    1,144      497     2,472
  Supplies             6,604    6,323    3,120    1,099    17,146
  Tax, license         2,650    1,518      226      305     4,699
  Meals &
    entertainment        187     -0-       216     -0-        403
  Office               1,842     -0-      -0-      -0-      1,842
    Total expenses    19,782   34,290   22,278   13,572    89,922

  Net loss
    claimed           19,782   34,290   21,558   12,592    88,222

     Petitioner generated income in 1992 and 1993 from the sale

of fish.

     Petitioner became interested in tournament sport fishing in

the mid-1980's.   Before 1990, petitioner entered a couple of

fishing tournaments in the Northeastern United States.

     Petitioner fished in June, July, August, and September (the

fishing season) of each of the years 1990 through 1993.

Petitioner went fishing only on weekends and vacations.

Petitioner did not travel south to fish during the 8 months of

October through May because he did not want to take his boat,

which weighed 20,000 pounds.
                                - 4 -

     During 1990 through 1993, petitioner had people accompany

him when he went fishing because it took two people to run the

boat:   One to steer and one to operate the fishing tackle.

Petitioner did not pay the people who accompanied him on his

fishing trips, but he agreed to pay them 10 percent of any

profits.

     Petitioner did not obtain corporate sponsors for his fishing

activity.   Petitioner did not speak at any seminars about fishing

or write any articles about fishing.

     Petitioner did not maintain a separate bank account for his

fishing activity.    Petitioner did not try to reduce his fishing

activity expenses.

     During the fishing season, petitioner spent 30 to 40 hours

per week fishing, and, during the off-season, petitioner spent

approximately 10 hours per week on fishing-related activities.

     On July 13, 1992, respondent mailed to petitioner a letter

informing petitioner that his 1991 income tax return had been

selected for examination and setting an appointment for

August 7, 1992.   By letter dated July 15, 1992, respondent’s

agent rescheduled the appointment to September 11, 1992.

     At the September 11, 1992, meeting between petitioner and

respondent’s agent, respondent’s agent provided petitioner with

a Form 4564, Information Document Request, on which respondent

requested petitioner to provide by September 28, 1992, copies of
                               - 5 -

petitioner’s 1989 and 1990 Federal income tax returns, and to

“address Sec 183 factors in writing and return.”    Respondent’s

agent’s activity record reflects that on September 25, 1992, the

agent “reviewed data received.”   By letter dated September 28,

1992, respondent’s agent forwarded to petitioner Form 5213,

Election to Postpone Determination as to Whether the Presumption

That an Activity Is Engaged in for Profit Applies, and requested

petitioner to complete and return it.   By letter dated October

14, 1992, respondent’s agent reminded petitioner to submit Form

5213.   On December 1, 1992, respondent received from petitioner

Form 5213, which reflected that petitioner signed it on October

16, 1992.   As a result of respondent’s receipt of Form 5213,

respondent suspended the examination of petitioner’s returns.

     During February of 1994, respondent’s agent Herrington

contacted petitioner with regard to the examination of

petitioner’s 1992 return.   Later Agent Herrington expanded the

examination to include the years 1991 and 1993.    On June 24,

1994, respondent mailed to petitioner a report disallowing

petitioner’s fishing activity losses for 1991, 1992, and 1993.

On July 19, 1994, Agent Herrington was informed that petitioner

had filed Form 5213.   Therefore he suspended the examination of

petitioner’s returns and notified petitioner that the examination

was suspended.
                                 - 6 -

     By letter dated August 29, 1995, respondent notified

petitioner that his 1990 through 1993 income tax returns had been

selected for examination.

     On November 3, 1995, respondent mailed to petitioner at P.O.

Box 3673, Wilmington, NC (Wilmington address), a notice of

deficiency for 1990 and a second notice of deficiency for the

years 1991 through 1993.    On February 23, 1996, the notices of

deficiency were returned to respondent with the notation “BOX

CLOSED UNABLE TO FORWARD RETURN TO SENDER.”

     Petitioner did not file a timely petition with respect to

the notices of deficiency, and, following petitioner’s late

filing of a petition with this Court with respect to the notices

of deficiency, in Follum v. Commissioner, T.C. Memo. 1996-474,

affd. 128 F.3d 118 (2d Cir. 1997), this Court determined that

respondent had mailed the notices to petitioner’s last known

address, the Wilmington address, and dismissed petitioner’s case

for lack of jurisdiction.    The Court of Appeals for the Second

Circuit affirmed our decision.

     On April 8, 1996, respondent assessed the amounts set forth

in the notices of deficiency and mailed to petitioner at the

Wilmington address notice and demand for payment of the amounts

assessed.   On April 12, 1996, respondent’s notice and demand for

payment was returned with the notation “Box Closed” and “Unable

to Forward.”
                               - 7 -

     On June 17, 1996, respondent mailed to petitioner at the

Rochester, New York, address that petitioner had used on his tax

returns for the years 1990 through 1993 separate notices of

intent to levy with respect to the liabilities assessed for 1990

through 1993.   The Postal Service forwarded the notices to

petitioner’s then-current address in Lewiston, New York.

     On December 29, 2000, respondent mailed to petitioner a

Final Notice of Intent to Levy and Notice of Your Right to a

Hearing Under I.R.C. 6330 (levy notice) with respect to

petitioner’s income tax liabilities for 1990 through 1993.

     On August 8, 2002, respondent filed a notice of federal tax

lien for petitioner’s assessed liabilities for the years 1990

through 1993.

     On August 12, 2002, respondent mailed to petitioner a Letter

3172, Notice of Federal Tax Lien Filing and Your Right to a

Hearing Under I.R.C. 6320, for petitioner’s assessed income tax

liabilities for the years 1990 through 1993.   On September 11,

2002, petitioner submitted to respondent a request for a hearing

for the lien filing and the proposed levy action.   On or about

March 20, 2003, petitioner submitted to respondent’s Appeals

Office an amendment to his September 11, 2002, request for a

hearing.

     On April 24, 2003, respondent’s Greensboro, North Carolina

Appeals Office issued to petitioner a notice of determination
                               - 8 -

(notice of determination) for the lien filed August 12, 2002.

The notice of determination stated that, because petitioner had a

prior opportunity to dispute his underlying tax liabilities for

the years 1990 through 1993, he was precluded from contesting

those liabilities in the hearing for the lien filing.   The

Greensboro office also issued to petitioner a “DECISION LETTER

CONCERNING EQUIVALENT HEARING UNDER SECTION 6320 and/or 6330

of the Internal Revenue Code” for the notice of levy dated

December 29, 2000.

     On May 27, 2003, petitioner filed the petition and attached

to it the decision letter and the notice of determination.

     On April 28, 2004, respondent filed a motion to dismiss for

lack of jurisdiction on the ground that no notice of

determination under section 6330 was sent to petitioner for the

years 1990 through 1993.   On January 13, 2005, this Court granted

respondent’s motion to dismiss on the ground that the levy notice

sent to petitioner on December 29, 2000, was not sent to

petitioner’s last known address and was invalid and that no

notice of determination was sent to petitioner for the levy

notice dated December 29, 2000.   On March 30, 2005, respondent

filed a motion to remand this case to respondent’s Appeals Office

for consideration of the underlying tax liabilities and the

issuance of a supplemental notice of determination addressing
                               - 9 -

those tax liabilities.   The Court granted respondent’s motion to

remand.

     On August 10, 2005, respondent’s Appeals Office issued to

petitioner a “SUPPLEMENTAL NOTICE OF DETERMINATION CONCERNING

COLLECTION ACTION(S) UNDER SECTION 6320 and/or 6330” in which

respondent’s Appeals officer sustained the determination made in

the notices of deficiency issued to petitioner with respect to

petitioner’s income tax for the years 1990 through 1993.

     In his request for an administrative hearing and the

amendment thereto with respect to the filing of the lien,

petitioner did not raise any collection alternatives.   Petitioner

asserted that respondent did not mail notice and demand for

payment to petitioner’s last known address, that the Form 5213

which he filed was invalid because it was not submitted to

respondent within 60 days of receipt by petitioner, and therefore

that the period of limitations had expired for the years 1990 and

1991.

     In the notice of determination, respondent’s Appeals officer

determined that notice and demand for payment had been mailed to

petitioner’s last known address because the notice had been

mailed to the address on petitioner’s most recently filed Federal

income tax return.

     Respondent’s Appeals officer determined that petitioner

submitted the Form 5213 to respondent more than 60 days following
                                - 10 -

the time respondent’s agent provided it to petitioner, but that

it was valid on the grounds that (1) once petitioner signed it

and submitted it to respondent, the period of limitations was

automatically extended, and that respondent had relied upon the

validity of the form; and (2) the 60-day period within which to

submit the Form 5213 never began to run because respondent had

not provided petitioner with written notice that respondent

intended to disallow petitioner’s loss attributable to his

fishing.

     Petitioner brought suit in the U.S. District Court for the

Western District of New York (New York case) seeking an

injunction against collection of his 1990 through 1993 taxes and

quiet title relief under 28 U.S.C. sec. 2410.     Follum v. United

States, 83 AFTR 2d 99-1622, 99-1 USTC par. 50,395 (W.D.N.Y.

1999), affd. without published opinion 199 F.3d 1322 (2d Cir.

1999).     The District Court held that it lacked jurisdiction to

consider petitioner’s statute of limitations challenge to his tax

liability because it was a challenge to the liability that would

properly be raised in a deficiency or refund suit, not an

allegation of procedural irregularities in the collection of

taxes cognizable under 28 U.S.C. sec. 2410.     The District Court

also held that petitioner’s request for an injunction was barred

by section 7421(a), the Anti-Injunction Act.     The District Court

rejected petitioner’s claim that assessment of his tax
                             - 11 -

liabilities was improper because the Government had not sent

notice and demand for payment as required by section 6303, on the

grounds that petitioner had raised the claim for the first time

in his response to the Government’s motion for summary judgment

and that his contention was without merit.

     Petitioner brought suit in the U.S. District Court for the

Eastern District of North Carolina (the North Carolina case)

under 28 U.S.C. sec. 2410 and asserted that the Government had

not sent notice and demand for payment to his last known address.

The United States moved to dismiss on the ground of res judicata.

The District Court found that insofar as petitioner sought to

assert a new basis for relief that was previously available to

him in his prior law suits, the doctrine of res judicata was

applicable, thus barring the action.    Petitioner did not appeal.

Follum v. United States, 89 AFTR 2d 2002-1625 (E.D.N.C. 2001).

                           Discussion

     Section 6320 provides that upon the filing of a notice of

lien the Secretary shall notify the person in writing of the

right to a hearing before the Appeals Office.   The Appeals

officer must verify at the hearing that the applicable laws and

administrative procedures have been followed.   Sec. 6330(c)(1).

At the hearing, the person requesting the hearing may raise any

relevant issues relating to the unpaid tax or the lien, including

appropriate spousal defenses, challenges to the appropriateness
                              - 12 -

of collection actions, and collection alternatives.    Sec.

6330(c)(2)(A).   The person may challenge the existence or amount

of the underlying tax, however, only if he or she did not receive

any statutory notice of deficiency for the tax liability or did

not otherwise have an opportunity to dispute the tax liability.

Sec. 6330(c)(2)(B).

     Where the validity of the underlying tax liability is

properly in issue, the Court will review the matter de novo.

Where the validity of the underlying tax is not properly at

issue, however, the Court will review the Commissioner’s

administrative determination for abuse of discretion.     Sego v.

Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114

T.C. 176, 181-182 (2000).

     Petitioner did not receive the notices of deficiency

relating to his tax years 1990 through 1993 until after the

expiration of the 90-day period to petition this Court although

the notices were sent to his last known address.2    Follum v.

Commissioner, T.C. Memo. 1996-474.     Respondent has not argued

that petitioner had the opportunity to challenge the correctness

of his tax liability by petitioning this Court from the notices

of deficiency.   We conclude that petitioner’s underlying tax

liability for 1990 through 1993 is properly in issue.


     2
      We note that the reason petitioner did not receive the
notices of deficiency is that petitioner failed to inform
respondent of a change in his address.
                               - 13 -

     Petitioner argues that respondent failed to provide him with

proper notice and demand for payment under section 6303.

Respondent counters that petitioner had an opportunity to raise

that argument in the New York case and is now barred from raising

it by the doctrine of res judicata.

     According to the judicial doctrine of res judicata:

     when a court of competent jurisdiction has entered a
     final judgment on the merits of a cause of action, the
     parties to the suit and their privies are thereafter
     bound “not only as to every matter which was offered
     and received to sustain or defeat the claim or demand,
     but as to any other admissible matter which might have
     been offered for that purpose.” * * *

Commissioner v. Sunnen, 333 U.S. 591, 597 (1948) (quoting

Cromwell v. County of Sac, 94 U.S. 351, 352 (1877)); see Wooten

v. Commissioner, T.C. Memo. 2003-113.

     Neither party disputes that the parties herein and the

parties in the New York case are the same.

     Petitioner brought both cases for relief from liens arising

from the same tax liability.   In response to the Government’s

motion for summary judgment in the New York case, petitioner

claimed that the Government had failed to give him timely notice

and demand for payment.

     In both the instant case and the New York case, petitioner

has sought cessation of tax collection action with respect to his

1990 through 1993 income taxes on the ground that the Government

did not comply with the requirements of section 6303.   While
                                - 14 -

petitioner’s present section 6320 suit is a separate and distinct

suit from his previous suit under 28 U.S.C. sec. 2410, petitioner

would rely on the same facts and evidence to establish that

respondent failed to give him timely notice and demand in each

suit.     See Sanders Confectionery Prods., Inc. v. Heller Fin.

Inc., 973 F.2d 474, 484 (6th Cir. 1992).

        The District Court for the Western District of New York took

note of petitioner’s notice and demand claim.     Primarily, the

District Court decided that a quiet title action does not allow a

taxpayer to collaterally attack the substantive validity of the

underlying tax assessment that led to the lien.     Specifically,

the District Court held that it lacked jurisdiction to consider

petitioner’s challenge to his tax liability based on the statute

of limitations because it was a challenge to the underlying tax

liability of a kind that generally may be raised in a Tax Court

deficiency proceeding or a refund suit and was not an allegation

of procedural irregularities in the collection of those taxes

that was cognizable under 28 U.S.C. sec. 2410.     The District

Court also rejected petitioner’s claim that the tax assessments

should be invalidated because the IRS had not properly sent

notice and demand for payment as required by section 6303 to

petitioner’s last known address.     The District Court noted that

because the claim was not raised in the amended complaint, it

could not be considered, but it added:     “In any event,
                              - 15 -

plaintiff’s claims that the tax assessments are invalid are

without merit for the reasons stated by the United States in its

reply brief.”   Follum v. United States, 83 AFTR 2d 99-1627 n.4,

99-1 USTC par. 50,395, at 87,966 n.4.   The Court of Appeals for

the Second Circuit affirmed the District Court’s judgment.

Follum v. United States, 199 F.3d 1322 (2d Cir. 1999).

     The District Court in the New York case denied petitioner’s

section 6303 claim not on jurisdictional grounds but on the

grounds that he had not timely raised the issue and that the

allegations were without merit.   If petitioner had raised the

section 6303 claim timely, there would have been subject matter

jurisdiction under 28 U.S.C. sec. 2410 over the claim because it

was a challenge to the procedural validity of the collection

action and not to the existence of the tax liability.    See Hughes

v. United States, 953 F.2d 531, 538 (9th Cir. 1992).     In the

District Court for the Eastern District of North Carolina,

petitioner alleged again that the Government had not sent him the

notice and demand for payment required by section 6303.    See

Follum v. United States, 89 AFTR 2d 2002-1625 (E.D.N.C. 2001),

which was not appealed.   The District Court dismissed the case,

holding that petitioner was seeking the same relief as in the New

York case, that the grounds on which he based his claim were

“previously available” to him in that suit, and that

consequently, his suit in the North Carolina case was barred by
                                - 16 -

res judicata.   The District Court thus applied the doctrine of

res judicata on the basis of the prior decision of the District

Court in the New York case.    Petitioner did not appeal the

District Court’s decision in the North Carolina case, which is

now final.   Petitioner cannot now challenge that decision or

raise the section 6303 claim.

     With respect to the expiration of the period of limitations,

under section 183(e)(4), if a taxpayer elects to postpone the

determination of whether an activity is engaged in for profit,

and in particular whether the presumption of section 183(d)

applies to the activity, the statutory period for making

assessments with regard to that activity does not expire until

2 years after the due date for filing the return for the last

year of the 5-taxable-year period to which the election applies.

Petitioner elected to postpone the determination of whether his

fishing was engaged in for profit beginning with the 1990 tax

year.   Therefore, the period of limitations for making an

assessment with regard to that activity for 1990 and 1991 did not

expire until April 15, 1997.    The notices of deficiency were

issued on November 3, 1995.    Filing a Form 5213 is a means by

which a taxpayer may elect to postpone the determination as to

whether a certain activity is engaged in for profit, for purposes

of applying section 183.   Wadlow v. Commissioner, 112 T.C. 247,

250-251 (1999).   The regulations provide that an individual
                              - 17 -

taxpayer may make the election provided in section 183(e) by

submitting the required material within 3 years after the due

date of the taxpayer’s return, but not later than 60 days after

the taxpayer receives written notice from a district director

that the latter proposes to disallow deductions attributable to

an activity not engaged in for profit under section 183.    Sec.

12.9(c)(1) and (2), Temporary Income Tax Regs., 39 Fed. Reg. 9948

(Mar. 15, 1974).

     Petitioner claims that the tax assessments for the years

1990 and 1991 are barred by the 3-year statute of limitations

under section 6501(a) and that the lien regarding those

assessments is therefore invalid because the Form 5213 he

submitted to respondent is invalid.    Petitioner contends that the

form is invalid because he did not submit the Form 5213 to

respondent within 60 days of being advised in writing that

respondent proposed to disallow the subject deductions under

section 183.   Petitioner claims that respondent’s agent provided

petitioner with a copy of the agent’s work papers at a meeting on

September 11, 1992, thereby providing written notice of the

proposed disallowance.

     We conclude that petitioner’s argument has no merit.

Respondent did not provide written notice to petitioner that

respondent proposed to disallow deductions attributable to

petitioner’s fishing activity.   We find no evidence that
                               - 18 -

respondent’s agent gave her work papers to petitioner on the day

of the meeting.    The copy of the work papers in the record

includes an entry stating that petitioner had submitted a Form

5213, which neither party contends occurred on September 11,

1992.    In the absence of the requisite written notice, the 60-day

requirement is inapplicable.    Petitioner therefore had until

April 15, 1994, 3 years from the due date of his 1990 return, to

submit a Form 5213.    Petitioner’s filing of Form 5213 on

December 1, 1992, was timely in that it preceded the April 15,

1994, deadline.3

     The parties disagree as to whether petitioner engaged in his

fishing activity with an objective of making a profit within the

meaning of section 183.    Section 183(a) provides the general rule

which disallows all deductions attributable to activities “not

engaged in for profit”.    Section 183(b)(1), however, qualifies

the general rule by allowing those deductions otherwise allowable

regardless of profit objective, e.g., interest and State and

local taxes.   Further, section 183(b)(2) allows those deductions

which would be allowable if the activity were engaged in for

profit, but only to the extent that gross income attributable to


     3
      We note that petitioner has only recently contested the
validity of his Form 5213. At the time of filing the form, both
parties treated it as valid and suspended examination of
petitioner’s returns. Petitioner appears to be attempting to
whipsaw respondent by claiming the assessments were barred by the
statute of limitations after enjoying the postponement of
determination under sec. 183.
                               - 19 -

the activity exceeds the deductions permitted by section

183(b)(1).    Section 183(c) defines an activity “not engaged in

for profit” as any activity other than one for which deductions

are “allowable * * * under section 162 or under paragraph (1) or

(2) of section 212.”    Essentially the test for determining

whether an activity is engaged in for profit is whether the

taxpayer engages in the activity with the primary objective of

making a profit.    Antonides v. Commissioner, 893 F.2d 656, 659

(4th Cir. 1990), affg. 91 T.C. 686 (1988).     Although the

expectation need not be reasonable, the expectation must be bona

fide.   Hulter v. Commissioner, 91 T.C. 371, 393 (1988).

Furthermore, in resolving the question, greater weight is given

to the objective facts than to the taxpayer’s statement of

intent.   Thomas v. Commissioner, 84 T.C. 1244, 1269 (1985), affd.

792 F.2d 1256 (4th Cir. 1986).

     In general, the Commissioner’s determination in the notice

of deficiency is presumed correct.      Rule 142(a); Welch v.

Helvering, 290 U.S. 111 (1933).    Under certain circumstances, the

burden of proof shifts to the Commissioner.     Sec. 7491(a)(1).

Petitioner does not contend that section 7491 is applicable, nor

did he establish that the burden of proof should shift to

respondent.    Accordingly, petitioner bears the burden of

establishing that he engaged in his fishing activity for profit
                             - 20 -

during the taxable years in issue.    See Rule 142(a); Welch v.

Helvering, supra.

     Section 1.183-2(b), Income Tax Regs., contains a

nonexclusive list of factors to be used in determining whether an

activity is engaged in for profit.    The factors are:   (1) The

manner in which the taxpayer carries on the activity; (2) the

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 assets used in the activity may appreciate

in value; (5) the success of the taxpayer in carrying on similar

or dissimilar activities; (6) the history of income or losses

with respect to the activity; (7) the amount of occasional

profit, if any; (8) the financial status of the taxpayer; and (9)

any elements of personal pleasure or recreation.    No single

factor, nor simple numerical majority of factors, is controlling.

See Cannon v. Commissioner, 949 F.2d 345, 350 (10th Cir. 1991),

affg. T.C. Memo. 1990-148.

     The fact that the taxpayer carries on the activity in a

businesslike manner and maintains complete books and records may

indicate that the activity was engaged in for profit.     Sec.

1.183-2(b)(1), Income Tax Regs.   Changes in operating methods,

adoption of new techniques, or abandonment of unprofitable

methods in a manner consistent with an intent to improve
                               - 21 -

profitability may also indicate a profit motive.    Id.    Petitioner

testified that he conducted a profit and loss analysis relative

to his fishing activity.    However, petitioner failed to produce

the analysis at trial.    Petitioner did not produce any fishing

activity records at trial and did not maintain a separate

checking account for his fishing activity.    Additionally, there

is no evidence of record to reflect that petitioner used records

to evaluate or improve the financial aspects of his fishing

activity.   The foregoing suggests that petitioner engaged in his

fishing activity for recreational purposes.    See Peacock v.

Commissioner, T.C. Memo. 2002-122.

     A taxpayer’s expertise, research, and study of an activity,

as well as his consultation with experts, may be indicative of a

profit motive.    Sec. 1.183-2(b)(2), Income Tax Regs.    Although

petitioner testified that he consulted with fishing experts,

there is no evidence in the record to indicate that petitioner

ever researched the expense involved in attempting to win the

prizes at fishing tournaments.    There is also no evidence of

record to show that petitioner performed any meaningful study of

the factors affecting the profitability of tournament fishing.

See Peacock v. Commissioner, supra; Hoy v. Commissioner, T.C.

Memo. 1991-575.

     Petitioner also argues that he had been fishing for over 30

years and “was considered a very good fisherman.”    However, there
                               - 22 -

is no evidence that petitioner had any expertise in winning

tournaments or translating tournament wins into a profitable

activity.    The expertise, research, and study factor favors

respondent.

     The fact that the taxpayer devotes much of his personal time

and effort to carrying on an activity, particularly if the

activity does not have substantial personal or recreational

aspects, may indicate an intention to derive a profit.     Sec.

1.183-2(b)(3), Income Tax Regs.   Petitioner spent weekends and

vacation time during the months of June through September

fishing.    The fact that the tournaments were conducted over the

weekends suggests that those conducting the tournaments viewed

the tournaments as primarily a weekend activity.   Although

petitioner spent a considerable amount of time fishing, the fact

that petitioner limited his fishing primarily to weekends and

that he fished only during a 4-month span suggests that he did

not undertake the activity to make a profit.    Additionally, the

activity has substantial recreational aspects.   The personal time

and effort factor suggests that petitioner fished for

recreational purposes and without the intent to make a profit.

     An expectation that assets used in the activity may

appreciate may be an indication of a profit objective.

Engdahl v. Commissioner, 72 T.C. 659, 668 (1979); sec. 1.183-

2(b)(4), Income Tax Regs.   Petitioner claims his boat
                                - 23 -

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
                                  - 24 -

losses would not be an indication that the activity was not

engaged in for profit.     Id.

     Although the presence of losses in the early years of an

activity is not inconsistent with an intention to make a profit,

the goal must be to realize a profit on the entire operation, a

proposition that presupposes not only future net earnings but

also sufficient net earnings to recoup the losses which have

been sustained in the intervening years.       Bessenyey v.

Commissioner, 45 T.C. 261, 274 (1965), affd. 379 F.2d 252 (2d

Cir. 1967).   Petitioner’s losses for 1990 through 1993 exceed

$88,000.   The losses were not the result of unforeseen

circumstances such as a natural disaster.       There is no evidence

that petitioner attempted to minimize these losses to break even,

let alone recoup past losses.       The record suggests that

petitioner was indifferent to the losses.       See Peacock v.

Commissioner, supra.     This factor weighs against petitioner.

     The amount and frequency of occasional profits earned from

the activity may also indicate a profit objective.       Sec. 1.183-

2(b)(7), Income Tax Regs.    Petitioner never reported a profit

from his fishing activity.       The occasional revenues generated

from the sale of fish during the years in issue were de minimis

compared to the expenses and depreciation incurred.       The

occasional profits factor weighs against petitioner.
                               - 25 -

     Petitioner contends that a small chance of making a large

profit may indicate the requisite profit objective.     Sec. 1.183-

2(a), Income Tax Regs.    Specifically, petitioner argues that the

cash and prizes available per season totaled $1,250,000 and he

believed he could earn a profit of $500,0004 per season.

Petitioner does not specify how many or which tournaments he

believed he could win to generate this profit.     Petitioner has

not persuaded us that he had a chance either to make a profit or

to recoup his losses.    The chance to make a large profit factor

weighs against petitioner.

     Substantial income from sources other than the activity,

particularly if the losses from the activity generate substantial

tax benefits, may indicate that the activity is not engaged in

for profit.   Sec. 1.183-2(b)(8), Income Tax Regs.    Although

petitioner was employed by Kodak during the years in issue, his

income was not substantial.    The income from other sources factor

is neutral.

     The presence of personal motives in the carrying on of an

activity may indicate that the activity is not engaged in for

profit, especially where there are recreational elements

involved.   Sec. 1.183-2(b)(9), Income Tax Regs.    Petitioner

argues that he suffers from severe motion sickness.     Petitioner


     4
      Petitioner states that this amount is in “today’s dollars”
but does not provide any details regarding his sources of data or
present value computations.
                               - 26 -

says this, coupled with the frequently low air and water

temperatures during tournaments, made every trip very

uncomfortable.    However, petitioner had been fishing for 30 years

before entering tournaments.     Presumably, petitioner enjoyed

fishing enough to overcome his discomfort when he fished outside

of tournaments.   On the basis of the record as a whole, we

conclude that petitioner entered fishing tournaments for

recreation and did not engage in his fishing activity with the

primary objective of making a profit.

     Having reviewed the underlying liability de novo, we find no

error.   Additionally, we find no error or abuse of discretion by

respondent in determining to uphold the filing of the lien

against petitioner.

     We have considered all of petitioner’s contentions, and to

the extent they are not addressed herein, they are irrelevant,

moot, or without merit.

     To reflect the foregoing,


                                             Decision will be entered

                                        for respondent.
