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2. The Expertise of the Taxpayers or Their Advisers
Efforts to gain experience and a willingness to follow
expert advice are considered in deciding if a taxpayer has a
profit objective. Sec. 1.183-2(b)(2), Income Tax Regs.
Preparation for an activity by extensive study of its practices
or by consultation with experts may indicate that a taxpayer has
a profit motive if the taxpayer follows that advice. Sec.
1.183-2(b)(2), Income Tax Regs.
Petitioners contend that petitioner's self-education and
reliance on others show that he had a profit objective. We
disagree. Petitioners did not show that petitioner studied
successful business and economic practices with respect to
breeding and racing horses. Petitioner used reputable
professional horse trainers. However, they did not advise
petitioner how to make a profit. The fact that petitioner did
not seek advice on the economic aspects of his activity suggests
that he lacked a profit motive. See Rinehart v. Commissioner,
T.C. Memo. 1998-205 (horse activity owner employed horse
professionals but not for business advice). This factor favors
respondent.
3. Taxpayer's Time and Effort
The fact that a taxpayer devotes much time and effort to
conducting an activity may indicate that he or she has a profit
objective. Sec. 1.183-2(b)(3), Income Tax Regs. Petitioner
spent 10 to 20 hours a week on his activity. He did not show
that a profitable horse activity could be successfully operated
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