- 16 - 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- toPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
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