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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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