- 26 -
and his testimony that he only examined the records of their
horse-related activities when he prepared the couple's tax
returns, we find his involvement in the activities was quite
limited. Thus Mr. Sullivan's success as an investment manager
has no significant bearing on the assessment of the horse-related
activity. Cf. Surridge v. Commissioner, T.C. Memo. 1998-304.
There is no evidence that Mrs. Sullivan has been involved in
other profit-seeking activities prior to or during her operation
of petitioners' horse-related activity.
The Activity's History of Income and Losses
An activity's history of income or loss may reflect whether
the taxpayer has a profit motive. Sec. 1.183-2(b)(6), Income Tax
Regs. Unless explained by customary business risks or unforeseen
or fortuitous circumstances beyond the taxpayer's control, a
record of continuous losses beyond the period customarily
required to attain profitability may indicate that the activity
is not engaged in for profit. Id.
Given petitioners’ extraordinary history of losses, and
their efforts to account for it, this factor is central to this
case. Petitioners have reported losses from their horse-related
activities for 23 of the 26 years in which they have been engaged
therein. The last profitable year was 1982. Prior to 1989,
there were 16 loss years and 3 income years. The amount of loss
in each pre-1989 loss year is not available; the parties have
Page: Previous 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 NextLast modified: May 25, 2011