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qualified individuals, such as trainer Rusty Hadden, to develop
her Appaloosas. We find that this factor favors petitioner.
Expectation That Assets May Appreciate
An expectation that assets used in the activity will
appreciate in value may indicate a profit objective. Sec. 1.183-
2(b)(4), Income Tax Regs. Petitioner clearly expected her
broodmares and their offspring to appreciate in value. We find
that this factor favors petitioner.
Past Success in Other Similar or Dissimilar Activities
The fact that the taxpayer has engaged in similar activities
in the past and converted them from unprofitable to profitable
enterprises may indicate that she is engaged in the present
activity for profit, even though the activity is presently
unprofitable. Sec. 1.183-2(b)(5), Income Tax Regs. Petitioner
successfully operated a billing service for a number of years
until her customers retired and/or moved out of the area. We
find that this factor favors petitioner.
Taxpayer's History of Income and Losses
Petitioner has never had a profitable year. She has had
sporadic sales over the years. Her net losses have continued
beyond the customary startup period for a horse breeding and
selling activity. We find that the circumstances within the
Appaloosa market and her personal setbacks do not fully explain
her long series of losses. Cf. sec. 1.183-2(b)(6), Income Tax
Regs. We find that this factor favors respondent.
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Last modified: May 25, 2011