## Facts

- H. Connely Plunkett was an architectural engineer who, outside his primary profession, participated in mud racing (beginning around 1975) and later emphasized truck pulling (around 1977).
- Mud racing involved elimination-style competition with a significant risk of vehicle damage, limiting expected profitability.
- Truck pulling was a growing spectator sport with larger purses; events drew large paid audiences and offered meaningful prize opportunities.
- Plunkett devoted substantial time to the activities (about 500 hours per year) while continuing his engineering work.
- He improved competitively over time and achieved a high national ranking among truck pullers.
- For tax years 1976–1978, he reported the racing/pulling activity as profit-seeking and deducted related expenses.
- The Commissioner issued deficiency notices disallowing the deductions on the ground the activity was not engaged in for profit under I.R.C. § 183.
- Plunkett petitioned the Tax Court for redetermination.

## Issues

1. Whether Plunkett’s mud-racing and truck-pulling activities for 1976–1978 were “activities engaged in for profit” under I.R.C. § 183, permitting deductions under I.R.C. §§ 162 or 212, or were hobby activities subject to § 183 limitations.
2. Whether the facts showed an actual and honest objective to earn a profit despite recreational aspects and a loss history.

## Decision

- The Tax Court held that Plunkett’s mud-racing and truck-pulling activities were engaged in for profit within the meaning of § 183.
- The Commissioner’s hobby-loss disallowance of deductions under § 183 was not sustained.

## Legal Principles

- Under I.R.C. § 183 and Treas. Reg. § 1.183-2, profit motive turns on whether the taxpayer had an actual and honest objective of making a profit, determined from all facts and circumstances.
- The regulation’s listed factors (including businesslike conduct, expertise, time and effort, profit potential, history of income or losses, and personal pleasure) are nonexclusive and are weighed together; no single factor is controlling.
- Enjoyment or recreational appeal does not, by itself, convert an activity into a hobby when objective conduct supports a profit objective.
- A history of losses, particularly in an early or developmental period, does not alone defeat profit motive if other evidence supports an intent to achieve profitability.

## Conclusion

The Tax Court concluded that Plunkett pursued truck pulling (and related mud racing) with a bona fide profit objective, shown by substantial time commitment, businesslike conduct, improved competitive standing, and a shift toward the sport’s more profitable opportunities; § 183 therefore did not bar the deductions on hobby-loss grounds.


Plunkett v. Commissioner, T.C. Memo. 1984-170 (U.S. Tax Ct. 1984)