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Burger v. Commissioner, T.C. Memo. 1985-523); Sec. 1.183-2(b)(9),
Income Tax Regs. Weighing the personal pleasures derived from
petitioner's involvement with her dogs against the profit
potential that could result from her breeding activity, we are
satisfied that the breeding activity was conducted more for the
purpose of subsidizing the costs of maintaining and showing her
dogs than for profit.
Our conclusion on the point is further supported by the
history of losses incurred by petitioner since she began treating
the activity as a trade or business for Federal income tax
purposes. "[W]here losses continue to be sustained beyond the
period which customarily is necessary to bring the operation to
profitable status such continued losses, if not explainable,
* * * may be indicative that the activity is not being engaged in
for profit." Sec. 1.183-2(b)(6), Income Tax Regs. During 1993,
petitioner deducted a $28,617 loss attributable to her dog
breeding activity. Since 1989, when petitioner began reporting
the income and expenses attributable to her dog breeding
activity, she has never realized a profit. Over a 4-year period
starting in 1993, expenses exceeded income by almost $60,000.
During that period annual income ranged from a low of $250 to a
high of $575. The magnitude of annual and cumulative losses
compared to the low levels of income generated strongly indicates
that petitioner did not conduct the activity for profit. Smith
v. Commissioner, supra; Burger v. Commissioner, supra.
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