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savings in relation to petitioners' losses cannot be assessed for
most years. However, for 1992, if we accept petitioners'
estimate of the value of their horses in that year, and Mr.
Sullivan's testimony that premiums for horse insurance are
approximately 4 percent of value, the cost of insurance is
relatively small in relation to the $51,295 in losses incurred
that year. There is no evidence of the savings from purchasing
used trucks. On this record, we do not believe petitioners have
shown that the foregoing cost-cutting measures were material in
relation to the losses they were regularly incurring. Cf. Taras
v. Commissioner, T.C. Memo. 1997-553; Smith v. Commissioner, T.C.
Memo. 1997-503.
Petitioners cite their 1985 decision to try a different
bloodline as evidence of a change in operating methods to improve
profitability. While we believe this change constitutes the type
of change contemplated in the regulations, it has not stemmed
petitioners' substantial losses, and 10 years of unbroken losses
have followed it. Moreover, the absence of any additional
significant changes since 1985, in the face of losses of the
magnitude being incurred by petitioners through 1995, creates an
inference adverse to petitioners' profit motivation.
A profit motive may be indicated where an activity is
carried on in a manner substantially similar to other activities
of the same nature which are profitable. Sec. 1.183-2(b)(1),
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