- 19 -
petitioner's control, such as the discovery that Luna Rutera
could not give birth, had not occurred. See Burger v.
Commissioner, 809 F.2d 355 (7th Cir. 1987), affg. T.C. Memo.
1985-523 (taxpayer did not show that activity would have been
profitable if the unforeseen circumstance had not occurred).
Petitioners contend that this case is like Patterson v.
United States, 198 Ct. Cl. 543, 459 F.2d 487, 493 (1972), and
Metcalf v. Commissioner, T.C. Memo. 1963-277 (profit motive found
despite 24 years of losses). We disagree. The taxpayer in
Patterson had a farm on which he initially tried to build a herd
of Angus cattle. When that activity was unsuccessful, he
switched to growing tobacco. Petitioner has not abandoned his
horse racing and breeding activity.
The taxpayers in Metcalf operated a commercial dairy. To
improve milk production, the taxpayers tried to develop three
different purebred breeds of cattle (Brown Swiss, Angus, and
Charolais). The taxpayers abandoned this attempt when it proved
to be unsuccessful. Petitioner did not abandon his unprofitable
activity.
This factor favors respondent.
7. Amount of Occasional Profits, if Any
We should consider the amount of any occasional profits the
taxpayer earned from the activity in relation to the amount of
losses incurred, the amount of the taxpayer's investment, and the
value of the assets used in the activity. Sec. 1.183-2(b)(7),
Income Tax Regs. Petitioner did not make a profit in any year
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011