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expenses for his horse activity of $39,324 for 1990 and $36,039
for 1991.
The taxpayer in Arwood v. Commissioner, supra, had losses
from 1981 to 1987. He emphasized the business of horse breeding.
He had a written business plan and relied on experts for business
advice. He believed that his horses would be profitable because
his horse's half-brother received $10,000 per breeding, and the
sire of his horse received $40,000 per breeding. Petitioner
focused little on making money.
In Pirnia v. Commissioner, supra, the Commissioner
determined a deficiency in income tax for 1982, the year after
the taxpayer bought her first horse. The taxpayer relied on
experts for financial advice. She expected profits to exceed her
losses. She could not rely on income from her physician husband
to pay for her horse activity because they were experiencing
marital difficulties. She discontinued show activities which
were unprofitable to concentrate on breeding.
This factor favors respondent.
7. Amount of Occasional Profits, If Any
Small occasional profits with large continuous losses do not
indicate that the taxpayer had a profit objective. Sec. 1.183-
2(b)(7), Income Tax Regs. Petitioner's losses were large and
continuous from 1979 when she started to 1990, the last year in
issue.
Losses caused by unforeseen circumstances do not necessarily
indicate that a taxpayer lacked a profit objective. See Engdahl
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