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where there is no net income from the activity to reduce the cost
of carrying the land for appreciation, see sec. 1.183-1(d)(1),
Income Tax Regs.
We conclude that the property and Mr. Abbene's horse-related
activities are not to be considered a single activity. During
the years in issue, the operation of Blue Ribbon did not reduce
the net cost of carrying the property for its appreciation in
value. Sec. 1.183-1(d)(1), Income Tax Regs. Accordingly, we
consider the horse-related activities, on the one hand, and the
property, on the other hand, as separate activities in deciding
whether a profit objective existed.
Petitioners concede that, during and after the years in
issue, the horses used in Blue Ribbon's operations actually
declined in value. Petitioners argue, however, that initially
they believed King Lion and Magic Moment would appreciate in
value as a result of winning horse shows, and that Spectacular
Rhythm and Nakita would appreciate in value if successfully bred.
Hindsight, petitioners argue, does not change the fact that they
started out with a reasonable expectation of appreciation.
Moreover, petitioners contend that the decrease in value was due
to circumstances beyond their control. Specifically, petitioners
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