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responsible for the day-to-day aspects of the activity, during
the years in issue, she was active in various organizations
associated with the horse industry, including the American Horse
Association, the Virginia Quarter Horse Association, the Virginia
Horse Council, the Roanoke Valley Horsemen Association, the
International Arabian Horse Association, the Arabian Registry,
and the Virginia Horse Association. Additionally, Mrs. Phillips
served as a District Director and as the Chairman of the Racing
Committee for the Virginia Arabian Horse Association. She
conducted racing seminars at various conventions and answered
questions as a columnist in The Virginia Horse Trader.
Accordingly, we conclude that the fact that petitioners devote
much of their personal time and effort to carrying on their horse
activity indicates an intention to derive a profit.
Section 1.183-2(b)(4), Income Tax Regs., provides that "The
term 'profit' encompasses appreciation in the value of assets,
such as land, used in the activity." Accordingly, the
regulations state that
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. * * *
[Id.]
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