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(taxpayers' decision to terminate consistently unprofitable horse
operation indicative of profit motive).
Amount of Occasional Profits
The amount of any occasional profits, if large in relation
to losses incurred or the taxpayer's investment, may indicate a
profit motive. Sec. 1.183-2(b)(7), Income Tax Regs. The
possibility of a substantial profit in a highly speculative
venture may indicate a profit motive even where profits are
occasional and small or nonexistent. Id. Petitioners' 3 profit
years generated income totaling $20,063, which is small in
relation to the reported losses, the total amount of which is
unknown but since 1989 totaled $279,270. As noted, petitioners
offer speculation concerning the value that Colonel Rey Lew,
their current prize stallion, may reach, but we do not believe
that the record provides any basis to believe that the horse's
value will increase dramatically in the future. Thus petitioners
have not shown any likelihood of a large profit in the future
that will recoup the losses they have incurred and continue to
incur.
Taxpayer's Financial Status
Substantial income from sources other than the activity,
particularly if the losses from the activity generate substantial
tax benefits, may indicate that the activity is not engaged in
for profit, especially if there are personal or recreational
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