Courtney and Brenda Lundquist - Page 24




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               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 testified that she profitably bred dogs from 1966           
          to 1984.  However, her testimony on this point was at best vague.           
          She said she sold a total of about 10 to 15 puppies.  Petitioners           
          did not report any income from this activity on their tax returns           
          that are in the record (1978 to 1984), and petitioners provided             
          no information about any income from dog breeding before 1978.              
          Petitioners did not show that petitioner's work at Kelly or                 
          Winnipesocki Airlines had any bearing on her ability to conduct a           
          profitable horse activity.                                                  
               This factor favors respondent.                                         
               6.   Taxpayer's History of Income or Losses                            
               A history of substantial losses may indicate that an                   
          activity was not conducted for profit.  Golanty v. Commissioner,            
          supra at 427; sec. 1.183-2(b)(6), Income Tax Regs.                          
               Petitioner had losses from the horse activity each of the 12           
          years from 1979 to 1990.  She had losses in those years totaling            
          $749,338 and income of $60,838.  Losses during the initial stage            
          of an activity do not necessarily indicate that the activity was            
          not conducted for profit.  Engdahl v. Commissioner, 72 T.C. at              
          669; sec. 1.183-2(b)(6), Income Tax Regs.  Petitioners contend              
          that the losses occurred during the startup phase.  We disagree.            


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