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Petitioners did not earn a profit from their horse-breeding
activity from 1983 through 1995. Petitioners reported income and
expenses with respect to the activity as follows:
Year Farm Income Farm Expenses Profit or (Loss)
1983 $530 $58,033 ($57,503)
1984 1,775 75,792 (74,017)
1985 3,105 76,912 (73,807)
1986 4,280 75,187 (70,907)
1987 10,375 66,366 (55,991)
1988 9,850 52,879 (43,029)
1989 10,500 62,878 (52,378)
1990 2,350 53,460 (51,110)
1991 1,890 45,540 (43,650)
1992 1,000 47,132 (46,132)
1993 1,200 45,838 (44,638)
1994 --- 32,848 (32,848)
1995 1,200 17,491 (16,291)
Total 48,055 710,536 (662,301)
In the notice of deficiency, respondent disallowed the losses
claimed for the horse-breeding activity for 1991, 1992, and 1993
finding that it was not engaged in for profit.
OPINION
Issue 1. Section 183
Initially we must decide whether petitioners' horse farm was
an activity engaged in for profit. Section 183(a) provides that
individual taxpayers will not be allowed deductions that are
attributable to an "activity * * * not engaged in for profit".
This terminology is defined in section 183(c) as "any activity
other than one with respect to which deductions are allowable for
the taxable year under section 162 [trade or business] or under
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