James C. Vallette and Arleen R. Vallette - Page 12

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          need not merely have had a profit objective before the years in             
          dispute.  The taxpayer must possess the required objective during           
          each disputed year.  Sec. 1.183-2(b), Income Tax Regs.; see also            
          Dennis v. Commissioner, T.C. Memo. 1984-4.  Although a profit               
          intent in a prior year may be evidence of such an intent in a               
          later year, a prior intent will not serve as a "blank check" for            
          a taxpayer to continually operate a loss activity outside the               
          scope of section 183.  See Daugherty v. Commissioner, T.C. Memo.            
               This factor favors respondent's determination.                         
               7.  Amount of occasional profits                                       
               We consider the occasional amount of profits, if any, from             
          the subject activity.  Sec. 1.183-2(b)(7), Income Tax Regs.  For            
          the reasons stated immediately above, we hold that this factor              
          favors respondent’s determination.                                          
               8.  Financial status of taxpayer                                       
               We consider petitioners' financial status.  See sec.                   
          1.183-2(b)(8), Income Tax Regs.  Substantial income from sources            
          other than an activity, particularly if the activity's losses               
          generated substantial tax benefits, may indicate that the                   
          activity is not engaged in for profit.  This is especially true             
          where there are personal or recreational elements involved.                 
          Id.; see Jasionowski v. Commissioner, 66 T.C. 312, 322 (1976).              
               From 1979 to 1994, petitioners reported substantial taxable            
          income independent of their breeding losses.  Petitioners'                  

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