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records may indicate that the activity was engaged in for profit.
Sec. 1.183-2(b)(1), Income Tax Regs.
Petitioners kept books and records for their horse racing
and breeding activity. Petitioners kept detailed ledgers by date
and check number in which they tracked monthly expenses.
Petitioners' detailed bookkeeping does not, by itself,
demonstrate an intent to generate a profit. Golanty v.
Commissioner, 72 T.C. 411, 430 (1979), affd. without published
opinion 647 F.2d 170 (9th Cir. 1981). A lack of profit objective
may exist where a taxpayer fails to abandon unprofitable methods,
change operations, or adopt new techniques in an attempt to
improve profitability. Sec. 1.183-2(b)(1), Income Tax Regs.
Accordingly, the maintenance of detailed books and records may
reveal the mere "trappings" of a profit objective, particularly
when a taxpayer fails to produce income statements, profit plans,
or business plans created to alter operations in an attempt to
reverse mounting losses. Osteen v. Commissioner, T.C. Memo.
1993-519, affd. in part and revd. in part 62 F.3d 356 (11th Cir.
1995).
Petitioners contend that before conducting any racing or
breeding activities, they consulted with individuals who had
experience in racing horses who helped them establish a business
plan. Petitioners also argue that since commencing their
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