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Tennessee Walking Horses. Petitioners appeared at trial to
be generally knowledgeable about purchasing, breeding,
training, caring for, and selling horses. In light of all
this, we find that petitioners did have sufficient
expertise to indicate that they engaged in their horse
breeding and boarding activity with an actual and honest
objective of making a profit.
3. Time and Effort Expended by the Taxpayer
While petitioners were both full-time employees of
General Motors during the years in issue, petitioners lived
on the property where they pursued their horse breeding and
boarding activity, and they performed all of the work
necessary for the activity themselves, with the exception
of veterinary and complicated farrier services.
4. Expectation That Assets Used in the Activity
Will Appreciate in Value
Section 1.183-2(b)(4), Income Tax Regs., provides in
pertinent part as follows:
The term "profit" encompasses appreciation
in the value of assets, such as land, used in
the activity. Thus, the taxpayer may intend
to derive a profit from the operation of the
activity, and may also intend that, even if no
profit from current operations is derived, an
overall profit will result when appreciation
in the value of land used in the activity is
realized since income from the activity
together with the appreciation of land will
exceed expenses of operation.
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