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Financial Status of the Taxpayer
The fact that the taxpayer does not have substantial income
or capital from other sources may indicate that the activity is
engaged in for profit. Sec. 1.183-2(b)(8), Income Tax Regs.
Petitioner earned a modest salary as a registered nurse. Yet,
petitioner did derive some tax benefits from her losses to the
extent that such losses offset her other income. We find that
this factor is neutral.
Elements of Personal Pleasure or Recreation
Petitioner does not ride horses. Although her Appaloosas do
provide a social outlet for meeting other people, we find that
any personal pleasure or recreation that petitioner derived from
her Appaloosas is insignificant in comparison to her business
motives. We find that this factor favors petitioner.
After weighing the above factors, we find that the objective
facts in the record support rather than detract from petitioner's
asserted intention of making a profit from her Appaloosa breeding
and selling activity. We conclude that petitioner has proved
that she engaged in her Appaloosa breeding and selling activity
during the taxable years in issue with the dominant hope and
intent of realizing a profit.
To reflect the foregoing,
Decision will be entered
for petitioner.
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Last modified: May 25, 2011