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Past Success in Similar or Dissimilar Activities
A taxpayer’s past success in similar or dissimilar
activities is relevant in determining profit motive. See sec.
1.183-2(b)(5), Income Tax Regs. Dr. Hillman concedes that a
previous effort at horse breeding was unsuccessful. Dr. Hillman
did operate his medical practice successfully. While success in
a dissimilar activity might weigh in petitioners’ favor, given
the substantial time that Dr. Hillman devoted to his medical
practice, it is not clear that he spent significant time on the
show horse activity. Accordingly, this factor is neutral. Cf.
Surridge v. Commissioner, T.C. Memo. 1998-304.
The Activity’s History of Income and Losses
An activity’s history of income or loss may reflect whether
the taxpayer has a profit motive. See sec. 1.183-2(b)(6), Income
Tax Regs. Unless explained by customary business risks or
unforeseen or fortuitous circumstances beyond the taxpayer’s
control, a record of continuous losses beyond the period
customarily required to obtain profitability may indicate that
the activity is not engaged in for profit. See id. A record of
substantial losses over many years and the improbability of
achieving a profitable operation are important factors bearing on
a determination of profit motive. See Golanty v. Commissioner,
supra at 426; Bessenyey v. Commissioner, 45 T.C. at 274.
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