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that the Johnstons could easily afford to operate the farm
activity at a loss. This fact alone, however, is not overly
persuasive, because "As long as tax rates are less than 100
percent, there is no 'benefit' in losing money." Engdahl v.
Commissioner, 72 T.C. at 670.
Finally, the following factors are indicative of a profit
motive. The parties stipulated that petitioners conducted their
farm activity in a businesslike manner, maintained accurate books
and records, hired expert advisers, employed competent farmhands,
and had personal experience in the activity in question. The
parties further stipulated that Gillian Johnston regularly
performed hard manual and menial labor at Bendabout, including
feeding and grooming horses, mucking out stalls, and cleaning
barns.
Respondent further concedes that petitioners responded to
setbacks at the farm and tried to make corrective changes in its
overall operations, including changing management two or three
times and trying to increase the value of Bendabout's brood mares
by breeding them to good pedigreed stallions in New York and
Kentucky, such as D'Accord and Java Gold, both of which had good
stud records.
Moreover, a taxpayer's regular experimentation with new
sources of revenue is further evidence of a profit motive. Hoyle
v. Commissioner, T.C. Memo. 1994-592. Here, petitioners
continued to seek out the most profitable uses for the farm,
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