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Engdahl v. Commissioner, supra at 669; sec. 1.183-2(b)(8), Income
Tax Regs. The rationale for this rule, in part, is that a
taxpayer with substantial income from sources unrelated to the
activity can more easily afford to operate the activity as a
hobby and may seek to use the losses from the activity to offset
the income from other sources.
During the taxable years at issue, Mrs. Whalley earned wages
of $71,425 for 1991 and $78,649 for 1992. Petitioner reported a
nontaxable pension of $38,872 for 1991 and $32,963 for 1992.
Moreover, for both years, no Federal income tax was withheld
according to the Forms W-2 issued for Mrs. Whalley by the Hayward
Police Department. Given the facts presented, the obvious
conclusion is that petitioners intended that they would reduce or
eliminate their tax liability because of their claim of alleged
losses. We find that petitioners' substantial income from other
sources coupled with the fact that they failed to claim any
withholding for the years in issue indicates a lack of profit
objective.
I. Elements of Personal Pleasure
That a taxpayer receives personal or recreational benefits
from an activity may indicate that the taxpayer is not engaging
in the activity for profit. Sec. 1.183-2(b)(9), Income Tax Regs.
Petitioner's testimony throughout the trial consistently
points to his daughter's equestrian accomplishments. He
indicated that his daughter rides a variety of their horses and
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