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This factor favors respondent.
3. Time and Effort Expended by Petitioners
We consider the time and effort spent by petitioners in
their horse activity. Sec. 1.183-2(b)(3), Income Tax Regs.
The fact that a taxpayer devotes much time to an activity may
indicate a profit intent.
Ms. Surridge spent little time in petitioner's activity; she
works long hours in her insurance business. Although Mr.
Surridge is involved full-time in the activity, we believe, as
discussed below, that his principal motive for his dedication to
this activity is pleasure or recreation, rather than profit.
This factor does not favor either party; it is neutral.
4. Petitioners' Expectation of Asset Appreciation
Another factor to consider is a taxpayer's expectation that
assets used in the activity may appreciate in value. Sec.
1.183-2(b)(4), Income Tax Regs. The term "profit" includes the
appreciation in the value of assets used in an activity. Id.
Although petitioners allege that they raised some of their
horses for sale, presumably at a profit, the record shows that
petitioners sold only one horse during the subject years. We are
unable to find that petitioners ever tried to keep track of the
value of their farm or their horses. In fact, Ms. Surridge
testified that she did not know the market value of her horses.
This factor favors respondent.
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