Dale Allan Rinehart - Page 5

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          of $2,150 and $3,500 for 1992 and 1993, respectively.  From 1986            
          through 1996, petitioner reported the following Schedule F gross            
          income and net losses from the horse breeding activity:                     
               Year           Gross Income         (Net Losses)                       
               1986           Unknown             ($92,210)                           
               1987           Unknown        (92,560)                                 
               1988           Unknown             (99,725)                            
               1989           Unknown        (122,948)                                
               1990           $-0-                (101,889)                           
               1991           388                 (119,872)                           
               1992           2,085          (117,904)                                
               1993           -0-                 (115,729)                           
               1994           300                 (154,365)                           
               1995      19,136                   (130,660)                           
               1996      32,137                   (104,137)                           
               In the notice of deficiency, respondent determined that                
          petitioner did not engage in the horse breeding activity for                
          profit and therefore disallowed the losses claimed for 1992 and             
          1993.                                                                       
                                   OPINION                                            
               Section 183(a) provides generally that, if an activity is              
          not engaged in for profit, no deduction attributable to such                
          activity shall be allowed except as provided in section 183(b).             
          Section 183(c) defines an "activity not engaged in for profit" as           
          "any activity other than one with respect to which deductions are           
          allowable for the taxable year under section 162 or under                   
          paragraph (1) or (2) of section 212."                                       
               For a deduction to be allowed under sections 162 or 212(1)             
          or (2), a taxpayer must establish that he or she engaged in the             
          activity with an actual and honest objective of making an                   



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