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that their records were used to devise methods of modifying their
operations to improve profitability. Mrs. Sullivan testified
merely that she reviewed the records to economize generally and
to insure that she was receiving the "best buys" on supplies.
Mr. Sullivan conceded that he reviewed the records only "when I
make out the income taxes". Since the records were not employed
to improve operations or stem the recurring, significant losses
from petitioners' horse-related activities, we discount them.
Golanty v. Commissioner, supra; Bessenyey v. Commissioner, supra
at 274.
A change of operating methods or abandonment of unprofitable
methods in a manner consistent with an intent to improve
profitability may indicate a profit motive. Sec. 1.183-2(b)(1),
Income Tax Regs. Petitioners contend that their decisions to
cease insuring their horses and to purchase only used trucks
after 1982 constitute changes in operating methods designed to
improve profitability.5 The evidence provided by petitioners is
too sketchy to be persuasive of their claim. Although Mr.
Sullivan provided some testimony regarding current costs for
horse insurance, without more information regarding the value of
petitioners' horses over the years, the significance of insurance
5 Petitioners also argue that Mrs. Sullivan performed all of
the unskilled manual labor attendant to keeping horses (such as
cleaning stables) and paid only for veterinarians, trainers, and
farriers. However, there is no evidence that this practice
represents any change in their mode of operation from the outset.
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