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persuaded by this argument. To the contrary, in the formative
years, which were 1986 and 1987, petitioner reported losses of
$50,598 and $78,430. In 1988, the losses grew to $109,216, with
a high in 1989 of $135,742. Although it is true that the gross
income of the ranch did grow to $15,567, $16,025, and $16,738
during the years 1990 through 1992, respectively, we find that
petitioner has failed to establish that there was any likelihood
of making the ranch profitable, and even more unlikely that
petitioner would ever recoup his total losses through 1992, which
were $716,459. See De Mendoza v. Commissioner, T.C. Memo. 1994-
314.
7. The Amount of Occasional Profits, If Any
Analysis of the amount of profit earned, especially in
relation to the losses incurred, the value of the investment, and
the value of the assets involved may be helpful in determining
profit objective. An occasional small profit from an activity
that generates otherwise consistently large losses may not be
determinative that the activity is conducted with a profit
objective, while an occasional substantial profit may indicate a
profit objective, especially where the losses or investment are
small. Sec. 1.183-2(b)(7), Income Tax Regs. Since its
inception, petitioners have never earned a profit from their
ranching activity. This factor favors respondent.
8. Financial Status of Petitioner
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