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"close to $15,000." Petitioners' net losses from their horse
operation total $465,134 for all the years of operation.8 In
1995, petitioners reported a loss from their horse activity of
$57,291. At the time of trial, petitioners had sold or disposed
of 25 horses and realized an overall loss of $53,205 on the sale
of those horses over the course of 15 years. Of the 25 horses
disposed of, petitioners realized a gain on 12 of the horses.
The total gain realized on the combined sale of all 12 horses was
$3,870. Of the 12 horses on which gain was reported on sale, no
more than $500 of gain was reported on any single sale.9 Even if
petitioners' three most valuable horses were sold for the maximum
amount that petitioners believe they are worth, it would still
not offset the losses reported from their horse activity in 1995.
It is, therefore, unlikely that petitioners will generate profits
on the sale of their horses in the near future that would recoup
more than a fraction of the past or current losses.
Past Successes in Activity
The fact that a taxpayer has engaged in similar activities
in the past and converted them from unprofitable to profitable
enterprises may indicate that he is engaged in the present
8See appendix.
9In 1988, petitioners sold two colts which they bred for
$1,000. We assume that the proceeds were allocated pro rata
between the two horses sold.
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