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If losses are sustained because of unforeseen or
fortuitous circumstances which are beyond the control
of the taxpayer, * * * such losses would not be an
indication that the activity is not engaged in for
profit. * * * [Sec. 1.183-2(b)(6), Income Tax Regs.]
Additionally, section 1.183-2(b)(7), Income Tax Regs., provides
that
The amount of profits in relation to the amount of
losses incurred, and in relation to the amount of the
taxpayer's investment and the value of the assets used
in the activity, may provide useful criteria in
determining the taxpayer's intent. * * *
Petitioners argue that they sustained losses because of
unforeseen circumstances beyond their control, viz, Mr. Phillips'
loss of his job, Mrs. Phillips' health problems, and their
chapter 13 bankruptcy. Petitioners argue that the period of time
it has taken them to develop their horse activity is not out of
line with the period seen in other cases, citing Pirnia v.
Commissioner, T.C. Memo. 1989-627. Additionally, petitioners
argue that the fact that they have not realized gross income in
their horse activity during each of the years in issue is not by
itself evidence that they lack the requisite profit objective.
Respondent argues that petitioners' consistent history of
losses during the period 1987 through 1993 is persuasive evidence
that petitioners did not expect to make a profit, citing Golanty
v. Commissioner, 72 T.C. at 427. Respondent, conceding that
petitioners encountered unforeseen circumstances, nonetheless
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