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Ms. Surridge began breeding and racing horses during the
early 1970's. Petitioners' activity never reported a profit.
Exclusive of the $1,500 insurance payment, petitioners received
less than $3,000 in race winnings during the subject years, while
claiming total losses of $228,988. Petitioners have not
established that any of these losses were due to unforeseen or
fortuitous circumstances beyond their control. Furthermore, they
offered no evidence at trial, other than their self-serving
testimony, to support their assertions that they expected their
pattern of losses to change.
This factor favors respondent.
7. Amount of Occasional Profits From the Activity
We consider the amount of occasional profits, if any, from
the subject activity. Sec. 1.183-2(b)(7), Income Tax Regs. An
occasional small profit from an activity generating large losses,
or from an activity in which the taxpayer has made a large
investment, would not generally be determinative that the
activity is engaged in for profit. However, substantial profit,
though only occasional, would generally be indicative that an
activity is engaged in for profit, where the investment or losses
are comparatively small. Id.
Petitioners barely recouped approximately 1 percent of their
expenses in the form of race winnings. Petitioners provided no
evidence that they ever made a profit from putting a horse out to
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