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successfully produced one foal, albeit one of limited value,
petitioners concede that Mr. Abbene made no further attempt to
breed Spectacular Rhythm. Petitioners assert that Mr. Abbene
encountered difficulties breeding Nakita. Yet, aside from a
vague reference to fertility problems, the record is devoid of
any evidence regarding any specific attempts to breed Nakita
during the years in issue. We conclude that there is no evidence
in the record that justifies Mr. Abbene's claimed expectation of
appreciation in the value of the horses used in Blue Ribbon's
operations.
Moreover, it is necessary that the taxpayer's objective be
to realize a profit on the entire operation. Bessenyey v.
Commissioner, 45 T.C. 261, 274 (1965), affd. 379 F.2d 252 (2d
Cir. 1967). This would require future net earnings and
appreciation sufficient to recoup the losses which the taxpayer
sustained in prior years. Id. Petitioners, however, failed to
produce any credible evidence that Blue Ribbon had any realistic
chance of recovering the excessive losses incurred since its
incorporation. In fact, petitioners conceded that they do not
know when or whether Blue Ribbon will ever become profitable.
Accordingly, we conclude that the expectation of asset
appreciation is a factor that weighs against petitioners.
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