Starving Artist Engaged in Activity With Profit Intent.

The petitioner, as described by the court, was a well-renown, successful artist that lost money.  The IRS denied the deductibility of her losses on the basis that she was not engaged in the art activity with a profit intent and, alternatively, if she was found to have a profit intent, that the claimed deductions should be disallowed because they weren't necessary business expenses.  However, the court determined that the petitioner was engaged in the art activity with a profit intent based on the nine factors set forth in the I.R.C. Sec. 183 regulations.  The petitioner conducted the activity in a business-like manner, was an expert artist that understood the economics of her business, devoted substantial time to the activity, had some reasonable expectation of appreciation in value of the artwork, had success in a substantially related field that could positively impact her activity, had many years of losses but this factor alone did not outweigh her honest profit intent, had only very occasional profits, but this factor did not weigh much in the favor of the IRS, and did not use her activity to shield income from a primary business or occupation.  Crile v. Comr., T.C. Memo. 2014-202.