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purchased for customers who bought lamb from his ranch, even
though he reported Schedule F income of only $475 for 1991. The
losses arising from such deductions were used to offset Mrs.
Whalley's significant salary from her employment as a police
lieutenant. Based on the record and the testimony presented at
trial, petitioners' claim that the Schedule F losses were
incurred in an activity having a bona fide profit motive exceeds
the bounds of credibility.
G. Amount of Occasional Profits Earned, If Any
If an activity generates only small, infrequent profits and
typically generates large losses, the taxpayer conducting the
activity may be less likely to have a profit objective. Golanty
v. Commissioner, 72 T.C. 411, 427 (1979), affd. without published
opinion 647 F.2d 170 (9th Cir. 1981); sec. 1.183-2(b)(7), Income
Tax Regs.
Petitioners' farm activity has never shown a profit. In
fact, petitioners' expenses have greatly exceeded their revenue.
For example, for the taxable years in issue, their revenues from
the activity were between $475 and $1,050, respectively, while
their expenses were between $28,327 and $37,747, respectively.
In short, this factor weighs against petitioners' assertion that
they operated the farm activity with the intent to turn a profit.
H. Taxpayer's Financial Status
Substantial income from sources other than the activity may
indicate that the activity is not engaged in for profit.
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