- 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 thePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
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