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the period customarily required to make an activity profitable,
if not explainable, may indicate that the activity is not engaged
in for profit. Id.
Petitioners began their horse farm in 1983. From 1983 to
1995, petitioners reported total losses of $622,301. During that
same period, petitioners reported gross receipts of $48,055. The
magnitude of the activity's losses in comparison with its
revenues is an indication that petitioners did not have a profit
motive with respect to the horse farm. Burger v. Commissioner,
supra at 360; Ballich v. Commissioner, supra.
Petitioners assert that the reported losses were typical for
the startup stage of a horse farm. The years at issue were
petitioners' 9th, 10th, and 11th years in the horse activity.
Although this Court has recognized that the startup phase of a
horse-breeding activity is 5 to 10 years, Engdahl v. Commissioner
72 T.C. at 669, the record reveals that the massive losses were
not the result of startup expenses of a horse-breeding
enterprise. Rather, the losses, in large part, were the result
of petitioners' selling only two foals during a period of 12
years. Additionally, we note that petitioners' subsequent years'
losses (1994 and 1995, the 12th and 13th years) confirm the
earlier pattern. We therefore find petitioners' argument that
the losses were the result of startup expenses to be without
merit.
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