Louis A. Filios and Estate of Emma L. Filios, Deceased, Louis A. Filios, Executor - Page 17

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          by an individual devoting 10 to 20 hours a week on the activity.             
          This factor is neutral.                                                      
               4.   Expectation That Property Used in the Activity Would               
                    Appreciate in Value                                                
               A taxpayer may intend, despite the lack of profit from                  
          current operations, that an overall profit will result when                  
          appreciation in the value of assets used in the activity is                  
          realized.  Bessenyey v. Commissioner, 45 T.C. 261, 274 (1965),               
          affd. 379 F.2d 252 (2d Cir. 1967); sec. 1.183-2(b)(4), Income Tax            
          Regs.  There is an overall profit if net earnings and                        
          appreciation are sufficient to recoup losses sustained in prior              
          years.  Bessenyey v. Commissioner, supra.                                    
               Petitioners contend that petitioner expected his horses to              
          appreciate in value.  We disagree.  Petitioner did not show that             
          the value of his horses and their offspring would appreciate                 
          enough to offset his losses.  This factor favors respondent.                 
               5.   Taxpayer's Success in Other Activities                             
               The fact that a taxpayer has previously engaged in similar              
          activities and made them profitable may show that the taxpayer               
          has a profit objective, even though the activity is presently                
          unprofitable.  Sec. 183-2(b)(5), Income Tax Regs.                            
               Petitioner successfully built Westfield Gage, but he did not            
          show how his success with Westfield Gage relates to his ability              
          to conduct a profitable horse racing and breeding activity.                  
               This factor favors respondent.                                          

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