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activity for a profit, even though the activity is presently
unprofitable. Sec. 1.183-2(b)(5), Income Tax Regs. Petitioners
have offered no evidence that before commencing their horse
racing and breeding activity, they had engaged in similar
activities that were profitable.
History of Income and Losses
A taxpayer's history of income, losses, and occasional
profits with respect to an activity may indicate the presence or
absence of a profit objective. Golanty v. Commissioner, 72 T.C.
at 426; sec. 1.183-2(b)(6), Income Tax Regs. Respondent contends
that petitioners consistently incurred losses on their horse
racing and breeding activity over many years, indicating that
they did not have the requisite profit objective.
A horse racing and breeding activity may be deemed to be
engaged in for profit despite consistent losses during the
initial startup phase. Golanty v. Commissioner, supra at 427.
We have previously found that the startup phase for an activity
involving horses may be between 5 and 10 years. Engdahl v.
Commissioner, supra at 669; Phillips v. Commissioner, T.C. Memo.
1997-128. Losses sustained beyond the period normally required
to generate profits may be an indication of a lack of profit
objective unless such losses occurred because of unforeseen or
unfortuitous circumstances. Petitioners sustained losses on
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