Barry S. and Yvonne C. Hillman - Page 24

                                        - 24 -                                         

          their failure even to track their horse show winnings, suggests a            
          certain indifference to the bottom line, and little probability              
          that their operations will become profitable.  Petitioners’                  
          history of losses, their inability to account for them, and their            
          bleak prospects all suggest a lack of profit motive.                         
          Amount of Occasional Profits                                                 
               The amount of occasional profits, if large in relation to               
          losses incurred or the taxpayer’s investment, may indicate a                 
          profit motive.  See sec. 1.183-2(b)(7), Income Tax Regs.                     
               In this case, petitioners have never earned a profit from               
          their show horse activity, and the evidence suggests that any                
          future profits are unlikely.                                                 
          Taxpayer’s Financial Status                                                  
               Substantial income from sources other than the activity,                
          particularly if the losses from the activity generate substantial            
          tax benefits, may indicate that the activity is not engaged in               
          for profit, especially if there are personal or recreational                 
          elements involved.  See sec. 1.183-2(b)(8), Income Tax Regs.                 
               Dr. Hillman’s earnings from his medical practice were                   
          $181,849 in 1993 and $142,362 in 1994 and never less than                    
          $142,362 annually from 1991 through 1996.  Dr. Hillman’s medical             
          practice income allowed petitioners to sustain the losses from               
          their show horse activity.  Deducting these losses significantly             
          reduced the after-tax cost of such activities to petitioners.                

Page:  Previous  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  30  31  32  33  Next

Last modified: May 25, 2011