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hypothetically that "you can buy a horse for $10,000 * * * start
breeding it, selling its babies for an equal amount and after you
sold the first one you could recapture your loss for the initial
investment." This statement, taken on its face, seems to support
petitioner's assertion that he expected his stallion to
appreciate in value because it could be used for breeding
purposes. Petitioner, however, never owned a stallion that could
potentially appreciate. In fact, according to a veterinarian's
soundness examination given to the animal prior to petitioner's
purchase, it was determined that the horse was not actually a
stallion as petitioner asserts, but rather a gelding. Petitioner
also testified that he could generate capital gain from the sale
of his horses, since they would appreciate from being displayed
at horse shows. However, petitioners had no income from either
selling or breeding horses. Accordingly, we find that
petitioners' horses could not be expected to significantly
appreciate in value.
E. Taxpayer's Success in Other Activities
We have recognized that a taxpayer's success in other
business activities may indicate a profit motive, despite a
currently unprofitable activity. Hoyle v. Commissioner, T.C.
Memo. 1994-592; sec. 1.183-2(b)(5), Income Tax Regs. During the
years in issue, petitioner, a retired police officer, is also
reporting substantial losses on his Schedules C from another
business activity known as TSI. The losses from that activity
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