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On their Federal joint income tax returns, petitioners
reported wage income of $26,690, $27,458, $29,576, and $31,804 in
the years 1987, 1988, 1989, and 1990, respectively. Petitioners
also reported on Schedules C income of $33,283, $32,261, $25,517,
and $38,926 from their framing and truss fabrication business in
1987, 1988, 1989, and 1990, respectively. In each of the years
at issue, the excess losses generated by petitioners' horse
racing and breeding activity were used to offset their otherwise
taxable income. On the other hand, petitioners were actually
sustaining economic losses that were offsetting relatively modest
amounts of wage and business income. On balance, this factor
generally supports petitioners' position.
Personal Pleasure or Recreation
The absence of personal pleasure or recreation relating to
the activity indicates the presence of a profit objective. Shane
v. Commissioner, T.C. Memo. 1995-504; sec. 1.183-2(b)(9), Income
Tax Regs.
Petitioners argue that they did not ride their horses or
make them available for others to ride and, therefore, there were
no elements of pleasure or recreation involved. While it is true
that petitioners did not ride their horses, nor permit others,
except qualified jockeys, to ride them, it is obvious that
petitioners' racehorses were not the kind of horses that are
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