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Petitioners did not establish that any of their broodmares
or racehorses appreciated in value or were likely to appreciate
in value to the extent that they could earn an overall profit and
recoup losses incurred over a 10-year period. See Tripi v.
Commissioner, supra; sec. 1.183-2(b)(4), Income Tax Regs.
Petitioners testified that they expected the adjustments
they made to their horse breeding and horse racing activities to
make both activities profitable. Petitioners, however, did not
present any credible evidence establishing that the adjustments
they made were likely to make the activities profitable.
From the time petitioners began breeding and racing horses
in 1980 until at least 1988, petitioners incurred substantial
losses from both activities, and petitioners did not realize any
gross income from their horse breeding activity.
Petitioners did not present sufficient evidence at trial to
establish that the losses they incurred were due to either
customary business risks or unforeseen circumstances. See sec.
1.183-2(b)(6), Income Tax Regs. The realization of continuous
and substantial losses over many years from both activities is a
strong indication, in this case, that petitioners did not engage
in either activity for profit. Golanty v. Commissioner, supra at
426; see sec. 1.183-2(b)(6), Income Tax Regs.
We conclude that petitioners have not established by a
preponderance of the evidence that they engaged in their horse
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