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startup phase of a horse breeding activity is 5 to 10 years.
Engdahl v. Commissioner, 72 T.C. 659, 669 (1979). Petitioner
sustained an uninterrupted series of losses beyond the period
which is customarily necessary to bring a similar operation to
profitable status. See id.; see also sec. 1.183-2(b)(6), Income
Tax Regs.
Petitioner also argues that the losses can be explained by a
series of unfortunate events beyond his control. We are
unpersuaded. Petitioner did not show that had events beyond his
control not occurred the horse breeding activity would have been
profitable. See Burger v. Commissioner, 809 F.2d 355 (7th Cir.
1987), affg. T.C. Memo. 1985-523. In light of these facts, we
find that petitioner's history of losses indicates a lack of a
profit motive.
Petitioner's Financial Status
Substantial income from sources other than the activity in
question, particularly if the activity's losses generated
substantial tax benefits, may indicate that the activity is not
engaged in for profit. Sec. 1.183-2(b)(8), Income Tax Regs. In
1992 and 1993, petitioner earned wages in the amounts of $169,858
and $166,040, respectively, as an airline pilot. Petitioner
could afford to operate the horse breeding activity as a hobby,
and it is likely that he sought to reduce or eliminate his tax
liability by using the losses from the horse breeding activity to
offset income from other sources. These facts, coupled with the
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