- 11 -
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
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011