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has previously converted similar activities from unprofitable to
profitable enterprises may be an indication of a profit motive
with respect to the current activity. Id.
Mr. Smith operated a successful medical practice, and
although petitioners' farm showed losses during the first 3
years, it has since been profitable. Petitioners had little
prior experience in dog breeding and showing. However, while
prior experience may indicate that a taxpayer is engaged in an
activity for profit, the lack of such experience does not
necessarily indicate that the activity was not engaged in with
the objective of making a profit. Pirnia v. Commissioner, T.C.
Memo. 1989-627; sec. 1.183-2(b)(5), Income Tax Regs.
Accordingly, we find that this factor weighs in favor of
petitioners.
6. The Activity's History of Income and/or Losses
An important consideration is petitioners' history of income
and/or losses with respect to their dog-breeding activity. Sec.
1.183-2(b)(6), Income Tax Regs. Losses continuing beyond the
period customarily required to make an activity profitable, if
not explainable, may indicate that the activity is not engaged in
for profit. Id.
By the end of the 1992 taxable year, petitioners had
incurred more than $218,000 in losses from the dog-breeding
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