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Sixth, a history of income, losses, and occasional profits
with respect to an activity can be indicative of whether a profit
objective exists. Allen v. Commissioner, 72 T.C. at 34; Kobza v.
Commissioner, T.C. Memo. 1992-176; sec. 1.183-2(b)(6), Income Tax
Regs. Respondent contends that the history of losses relating to
petitioner's horse activity conclusively establishes that he
lacked the requisite profit objective necessary to render section
183 inapplicable. Although a long history of losses is a
persuasive criterion, it has long been established that this
factor alone is not determinative of a lack of a profit
objective. See Engdahl v. Commissioner, 72 T.C. at 669 (profit
objective found to exist despite 12 consecutive years of losses
in horse-breeding activity); Pirnia v. Commissioner, supra
(profit objective found to exist despite 6 consecutive years of
losses in horse-breeding activity). This is particularly true
when such losses occur during the formative years of a business,
especially one involving horses. The startup phase of an
American saddlebred breeding operation is 5 to 10 years. Engdahl
v. Commissioner, supra at 669.
During the initial years of his horse activity, petitioner
expected to make a profit racing his horses. However, due to his
limited resources, petitioner soon concluded that such an
expectation was unrealistic and shifted his focus to horse
breeding. Given that this shift occurred around 1988,
petitioner's horse-breeding function was well within the 5- to
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