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5. The Success of Petitioners in Carrying On Other Similar
or Dissimilar Activities
The fact that a taxpayer has engaged in similar activities
in the past and converted them from unprofitable to profitable
may indicate a profit motive with respect to the activity in
question, regardless of recent profits. Sec. 1.183-2(b)(5),
Income Tax Regs. Before commencing the operation of Silk Oak,
petitioners had never run a profitable ranch and had little
knowledge of the business. We, therefore, conclude that this
factor favors respondent.
6. Petitioners' History of Income and Losses With Respect
to the Activity
The presence of consistent losses militates against a
finding that an activity was engaged in for a profit. Sec.
1.183-2(b)(6), Income Tax Regs. An activity, however, may be
deemed to be engaged in for profit despite a history of losses in
initial or startup stages. Id. Therefore, if losses continue to
be sustained beyond the period which is normally necessary to
bring the operation into profitable status, we will consider such
losses as an indication of a lack of profit motive. Golanty v.
Commissioner, 72 T.C. at 426. With respect to horse-breeding, we
stated in Golanty v. Commissioner, supra at 427 (quoting
Bessenyey v. Commissioner, 45 T.C. 261, 274 (1965), affd. 379
F.2d 252 (2d Cir. 1967)):
"the presence of losses in the formative years of a
business, particularly one involving the breeding of
horses, is not inconsistent with an intention to
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