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Castle occurred in 1980 and 1981. The injury to Ruth Ann K
occurred in 1983. The injuries to Traders K, Tekla Tekla Two,
and Captain Konik occurred after the years in issue. We
recognize that these injuries to some of petitioners' horses
caused some of the losses. However, petitioners did not offer
any objective evidence to explain how injuries between 1980 and
1983, and subsequent to 1990, prevented them from operating a
profitable activity during the years 1987, 1988, 1989, and 1990.
Indeed, despite the fact that petitioners sustained consistent
losses over 16 consecutive years, they continued to engage in
horse racing and breeding.
Amount of Profits
The amount of profits earned in relation to the amount of
losses incurred, the amount of the investment, and the value of
the assets in use may indicate a profit objective. Sec. 1.183-
2(b)(7), Income Tax Regs. The opportunity to earn substantial
profits in a highly speculative venture may be sufficient to
indicate that the activity is engaged in for profit even though
only losses are produced. Id.; see Dawson v. Commissioner, T.C.
Memo. 1996-417. In determining whether the taxpayer entered into
the activity for profit, a small chance of making a large profit
may indicate the requisite profit objective. Sec. 1.183-2(b)(7),
Income Tax Regs.
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