Donald Keith Morley and Rebecca B. Morley - Page 15

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          Morley arrived home after dark, very tired, in a bad mood, and              
          dirty with a "certain aroma" from his work on the farm.  It                 
          appeared to the Court that Mrs. Morley resented the amount of               
          time Mr. Morley spent on the horse-breeding activity and that she           
          was unhappy that her husband came home every night dirty and                
          smelly.  We are not convinced that Mr. Morley would subject                 
          himself to such rigors solely for recreation or pleasure.                   
               Furthermore, the record indicates that, as of the time of              
          trial, Mr. Morley had ridden the horses no more than three times            
          and only in conjunction with his work on the farm.  The time and            
          effort Mr. Morley spent on the horse-breeding activity combined             
          with his lack of personal pleasure from the activity indicate a             
          profit motive.                                                              
               D.   History of Income or Losses                                       
               A record of substantial losses over several years may be               
          indicative of the absence of a profit motive.  Golanty v.                   
          Commissioner, 72 T.C. 411, 426 (1979), affd. without opinion 647            
          F.2d 170 (9th Cir. 1981).  Section 1.183-2(b)(6), Income Tax                
          Regs., however, provides that a series of losses during the                 
          startup phase of an activity may not necessarily be an indication           
          that the activity is not engaged in for profit.  Furthermore, if            
          losses are sustained because of unforseen circumstances beyond              
          the control of the taxpayer, then such losses would not be an               
          indication that the activity is not engaged in for profit.  Id.             





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