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method of advertising horses for sale, e.g., Engdahl v.
Commissioner, supra at 667, petitioner's failure to attempt to
reach a larger customer base is not consistent with a profit
motive. See Dodge v. Commissioner, supra.
“A change of operating methods, adoption of new techniques
or abandonment of unprofitable methods in a manner consistent
with an intent to improve profitability may also indicate a
profit motive.” Sec. 1.183-2(b)(1), Income Tax Regs.
Petitioners argue that petitioner made changes in his operating
methods that indicate a profit motive. There is no evidence that
most of the changes petitioners refer to, such as, the cattle
weight gain program, taking on outside horses,4 instituting a
breeding program, and maintaining the breeding rights to mares
sold, were implemented prior to or during the years in issue.
Subsequent actions do not materially impact this aspect of our
analysis under section 183 for the years in issue. See Borsody
v. Commissioner, T.C. Memo. 1993-534, affd. per curiam 92 F.3d
1176 (4th Cir. 1996). While we agree that hiring a trainer and
leasing cattle may have been more cost effective, we are not
persuaded that petitioner implemented methods to control his
losses. See Dodge v. Commissioner, supra.
4 While petitioner did take on outside horses at the Arkansas
ranch, he did not actively pursue that aspect of his activity.
During 1992 and 1993, petitioner obtained only $150 of net income
from outside horses.
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