James C. Vallette and Arleen R. Vallette - Page 5

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          An individual’s expectation of profit need not be reasonable, but           
          he or she must have a good faith objective of making a profit.              
          Allen v. Commissioner, 72 T.C. 28, 33 (1979); sec. 1.183-2(a),              
          Income Tax Regs.  Whether a taxpayer conducts an activity with              
          the requisite profit objective rests on the facts of the case.              
          Golanty v. Commissioner, 72 T.C. 411, 426 (1979), affd. without             
          published opinion 647 F.2d 170 (9th Cir. 1981).  More weight is             
          given to the objective facts than to an individual's subjective             
          expression of his or her intent.  Sec. 1.183-2(a), Income Tax               
          Regs.  Because respondent determined that petitioners’ breeding             
          activity was not engaged in for profit, petitioners must prove              
          that respondent's determination is in error.  Rule 142(a);                  
          Welch v. Helvering, 290 U.S. 111, 115 (1933); Westbrook v.                  
          Commissioner, supra at 876.  Petitioners rely almost exclusively            
          on their limited testimony, which focuses mainly on taxable years           
          preceding the years in issue, as well as the scant testimony of             
          Stephen and Kim, which also is aimed primarily at prior years.              
          The only exhibits in evidence are:  (1) Petitioners’ 1979 through           
          1994 Forms 1040 and (2) the subject notice of deficiency.  The              
          parties stipulated to minimal facts, and all of these stipulated            
          facts are best described as favorable to respondent.                        
               We are aided by the following nonexclusive factors in                  
          deciding whether an activity is engaged in for profit: (1) The              
          manner in which the taxpayer carries on the activity; (2) the               
          expertise of the taxpayer or his or her adviser; (3) the time and           

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