Sidney Dishal and Anna Dishal - Page 11

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        Income Tax Regs. Respondent argues that petitioners' consistent               
        history of losses in the horse activities is persuasive evidence              
        that they did not expect to make a profit. The losses petitioners             
        sustained, however, were in part due to unforeseen and unfortunate            
        circumstances beyond their control which abruptly ended the racing            
        careers, and in some instances the lives, of several of their                 
        horses. In addition, petitioners have abated their net losses from            
        the horse activities in recent years. Furthermore, petitioners are            
        capable of making up their losses from prior years since their                
        horses are now entered in high stakes races. We conclude that the             
        losses sustained are not an indication that the horse activities              
        were not engaged in for profit.                                               
             Occasional profits which are earned from an activity may                 
        indicate a profit motive. Sec. 1.183-2(b)(7), Income Tax Regs. Several        
        of petitioners' horses have won more than $100,000 over their racing          
        careers. Furthermore, an opportunity to earn a substantial ultimate           
        profit in a speculative venture may be sufficient to indicate a profit        
        motive. Sec. 1.183-2(b)(7), Income Tax Regs. Petitioners have been            
        "breeding up" their                                                           
        horses for higher stakes races. Petitioners currently have two horses         
        entered in Breeder's Cup races which have purses over $1 million. This        
        indicates a profit motive.                                                    
        The presence of elements of personal pleasure or recreation in                
        carrying on an activity may indicate that the activity is not engaged in      
        for profit. Sec. 1.183-2(b)(9), income Tax Regs. On the basis of all the      






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