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petitioners’ farm improvements had appreciated $24,000 by 1998.
We assume the vast majority of this appreciation occurred as the
improvements were made because they were self-constructed.
Petitioner expected that, for each dollar he spent on the
farm improvements, it would increase the value of petitioners’
property by $2. Also, as stated above, petitioners’ horses and
farm improvements appreciated significantly in value during the
years in issue. Petitioners had a bona fide expectation of
future profit. See Estate of Baron v. Commissioner, 83 T.C. 542,
553 (1984), affd. 798 F.2d 65 (2d Cir. 1986) (reasonable or
realistic expectation of profit is not required if taxpayer has
bona fide expectation of profit); Dreicer v. Commissioner, 78
T.C. at 643-645.
We are convinced that petitioners had appreciation in their
horses and farm improvements during the years in issue of
approximately the same order of magnitude as their losses in
those years. Thus, we need not decide whether petitioners’
residence and land also increased in value. Accordingly, this
factor favors petitioners.
5. Taxpayer's Success in Other Activities
The fact that a taxpayer previously engaged in similar
activities and made them profitable may show that the taxpayer
has a profit objective. Sec. 183-2(b)(5), Income Tax Regs.
Petitioners have not engaged in similar activities for profit,
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