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also note that petitioners made various attempts to improve
the profitability of their horse-related activity, such as
converting land to pasture and alfalfa, constructing fences
and barns, and attempting to acquire and acquiring mares in
foal. Petitioners also withdrew from the thoroughbred
business when it proved unprofitable and focused their
attention on breeding Tennessee Walking Horses.
7. Amount of Occasional Profits
Petitioners did not report a net profit during any of
the years in issue. However, petitioners did report a net
profit of $1,274 in 1994 and testified at trial that they
expected to realize a profit of $8,000 to $10,000 per year
once they established a viable stock of Tennessee Walking
Horses for breeding. We also note that petitioners' losses
decreased gradually between 1991 and 1995, and that they
realized substantial gains from the sale of the Union
County property in 1994.
8. Financial Status of the Taxpayer
Although petitioners were both full-time employees of
General Motors throughout the years in issue, neither of
them earned particularly high wages during any of those
years. Petitioners also testified that they were forced to
cash in their stock options and retirement options with
General Motors to finance the purchase of the Union County
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