Dean L. and Cynthia D. Sanders - Page 20





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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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