James C. and Vivian C. Dodge - Page 15

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          horses.  It is necessary, however, that the objective be to                 
          realize a profit on the entire operation.  Bessenyey v.                     
          Commissioner, 45 T.C. 261, 274 (1965), affd. 379 F.2d 252 (2d               
          Cir. 1967).  This would require future net earnings and                     
          appreciation sufficient to recoup the $622,301 of losses reported           
          for 1983 through 1995.  Petitioners failed to produce any                   
          evidence to show that their activity had a reasonable chance of             
          recovering losses reported.                                                 
               5.  Taxpayer's Success in Similar or Dissimilar Activities             
               We next consider petitioners' prior experience in similar or           
          dissimilar activities.  Sec. 1.183-2(b)(5), Income Tax Regs.                
          Although an activity is unprofitable, the fact that a taxpayer              
          has previously converted similar activities from unprofitable to            
          profitable enterprises may be an indication of a profit motive              
          with respect to the current activity.  Id.                                  
               Mrs. Dodge started an accounting and service business in               
          1991 that generated a profit during the years at issue.  Mr.                
          Dodge operated a successful law practice during the years in                
          issue.  Petitioners had successful business-type experience.                
          Petitioners did not show that their acquired business expertise             
          was used in the horse activity.                                             
               6.  The Activity's History of Income and/or Losses                     
               An important consideration is petitioners' history of income           
          and/or losses with respect to their horse-breeding activity.                
          Sec. 1.183-2(b)(6), Income Tax Regs.  Losses continuing beyond              



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