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profits are occasional and small or nonexistent. See id. Horse
breeding and racing are highly speculative ventures. Petitioners
did not report a profit in any of the years they carried on the
horse-related activity.
8. Petitioners’ 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.
Petitioner earned $52,815 in 1993, and Mr. Pitts received
$11,659 in Social Security benefits. Petitioners derived some
tax benefits from their claimed losses.
9. Elements of Personal Pleasure
The mere fact that a taxpayer derives personal pleasure from
a particular activity does not show a lack of profit motive. See
sec. 1.183-2(b)(9), Income Tax Regs. The presence of personal
motives may indicate that the activity is not engaged in for
profit. This is especially true when there are recreational
elements involved. See id.
It is not clear from the record whether petitioner rode the
horses. We assume that Mr. Pitts could not because of his
disability. It is clear, though, that petitioners enjoyed horses
and have a long history of working with them.
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