The Tax Court has found that a taxpayer participating in tournament sport fishing was doing so for recreational purposes, not for making a profit. The Court came to this conclusion because the tournaments entered into by the taxpayer took place on weekends and he only participated in them four months out of the year. The taxpayer also made no effort to minimize substantial losses he had incurred. Because of the recreational nature of fishing and the time and effort required to make a profit from tournament fishing, the Court found that there was no intent on the part of the taxpayer to make a profit. As a result, the taxpayer was not allowed to deduct his losses.
Points of Interest
- The new law is a compromise between two powerful political forces.
- With unemployment above 9% for 20 straight months and 42% of the unemployed being unemployed for 6 months or longer, Congress and the President realized the need for extended unemployment benefits.
- The Section 179 deduction was also expanded for 2011. The new limit is $500,000, the phase-out period being between $2,000,000 and $2,500,000.
By: Basi & Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors