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E. Petitioners' Financial Status
Substantial income from sources other than the activity in
question, particularly if the activity's losses generate
substantial tax benefits, may indicate that the activity is not
engaged in for profit. Sec. 1.183-2(b)(8), Income Tax Regs.
Respondent argues that Mr. Morley greatly reduced the taxes
due from his dental practice income by his reported losses from
the horse-breeding activity. Petitioners argue that they and
their three children lived a middle class lifestyle. They also
point out that they did not maintain a retirement plan or have
substantial savings to satisfy their financial needs during
retirement.
We have previously stated that it is unconvincing to argue
that a taxpayer would spend $1 with the objective of saving a
portion of that dollar on taxes. "'As long as tax rates are less
than 100 percent, there is no 'benefit' in losing money'."
Harrison v. Commissioner, T.C. Memo. 1996-509 (quoting Engdahl v.
Commissioner, 72 T.C. at 670). We believe that Mr. Morley
engaged in the horse-breeding activity to provide for his and his
wife's retirement. Based on these facts, we do not find that
this factor indicates that the horse-breeding activity was not
engaged in for profit.
F. Conclusion
After reviewing the entire record, we conclude that Mr.
Morley engaged in the horse-breeding activity with the primary
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