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their returns for the period 1991 through 1996; they ultimately
stipulated that the “known” amounts expended for horse shows for
the period totaled $8,451, which indicates an overstatement
exceeding 46 percent. Moreover, to the extent records were
maintained, there is no evidence that they were utilized to
improve the performance of a losing operation. Accordingly, we
discount them as a factor. See Golanty v. Commissioner, supra at
430; Bessenyey v. Commissioner, 45 T.C. at 274; Sullivan v.
Commissioner, T.C. Memo. 1998-367.
A change in operating methods or abandonment of unprofitable
methods in a manner consistent with an intent to improve
profitability may indicate a profit motive. See sec. 1.183-
2(b)(1), Income Tax Regs. However, in the instant case, there is
no convincing evidence that petitioners made modifications in
their activity to improve profitability. Petitioners’ failure to
consider a replacement for their only brood mare has been
discussed. Similarly, there is no convincing evidence that Dr.
Hillman sought to improve on the record of breeding fees earned
by his remaining stallions; i.e., those he did not have gelded.
Dr. Hillman cited his “leasing” arrangement for Riskybiznis under
which a trainer took on the costs of the horse’s care, but any
savings here--which were not documented--were almost certainly
small in relation to petitioners’ annual losses.
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