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petitioners' argument that the losses were the result of startup
expenses to be without merit.
In addition, petitioners assert that their losses were the
result of "unforeseen or fortuitous circumstances * * * beyond
* * * [their] control". Sec. 1.183-2(b)(6), Income Tax Regs.
Petitioners assert that the disease PRA caused an unanticipated
increase in expenses in 1992 because they were required to
purchase new stock for breeding. This argument fails for two
reasons. First, PRA did not have a significant impact on
petitioners' dog-breeding activity during the taxable years in
question. Petitioners did not know that any of their dogs even
had PRA until 1994. Second, as already noted, petitioners'
losses were largely the result of the high cost of dog boarding
and handling, and not from the purchase of breeding stock.
7. Amount of Occasional Profits
The amount and frequency of occasional profits earned from
the activity may also be indicative of a profit objective. Sec.
1.183-2(b)(7), Income Tax Regs. Given that petitioners have
never reported a profit on their dog-breeding activity, we find
that this factor supports a finding that the dog-breeding
activity was not carried on for profit. Glenn v. Commissioner,
T.C. Memo. 1995-399.
8. Financial Status of the Taxpayer
We next consider petitioners' financial status. Sec. 1.183-
2(b)(8), Income Tax Regs. Substantial income from sources other
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