- 26 -
Section 1.183-1(d)(1), Income Tax Regs., however, provides:
If the taxpayer engages in two or more separate
activities, deductions and income from each separate
activity are not aggregated either in determining
whether a particular activity is engaged in for profit
or in applying section 183.
In other words, two activities will be considered separate
activities with respect to ascertaining a profit objective when
there is no net income from one activity to reduce the cost of
the second activity. See sec. 1.183-1(d)(1), Income Tax Regs.
Petitioners argue that they have invested in two assets:
(1) The horses and (2) the horse farm and the land on which it is
located. Respondent argues that the horse farm and the land are
not relevant to the instant case because petitioners' horse
activity never produced income in excess of expenses.
We conclude that petitioners' horse farm and land are not to
be considered as a single activity along with petitioners' horse
activity. During the years in issue, the horse activity did not
reduce the net cost of carrying the horse farm and land for their
appreciation in value. Sec. 1.183-1(d)(1), Income Tax Regs.
Accordingly, we consider the horse activity and the horse farm
and land as separate activities in deciding whether a profit
objective existed.
Based on our review of the record, we conclude that
petitioners intended that an overall profit would result from the
Page: Previous 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 NextLast modified: May 25, 2011