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but petitioner had engaged in other successful activities.
Respondent concedes that this factor favors petitioners.
6. Taxpayer's History of Income or Losses
A history of substantial losses may indicate that the
taxpayer did not conduct the activity for profit. See Golanty v.
Commissioner, 72 T.C. at 427; sec. 1.183-2(b)(6), Income Tax
Regs. A taxpayer may have a profit objective even when the
activity has a history of losses, see Bessenyey v. Commissioner,
45 T.C. at 274, because losses during the initial stage of an
activity do not necessarily indicate that the activity was not
conducted for profit, see Engdahl v. Commissioner, 72 T.C. at
669; sec. 1.183-2(b)(6), Income Tax Regs. We have said that the
startup phase of a horse-breeding activity may be 5 to 10 years
for standardbred horses. See Engdahl v. Commissioner, supra;
Burrow v. Commissioner, T.C. Memo. 1990-621; Starr v.
Commissioner, T.C. Memo. 1969-35. A period of 5 to 10 years for
the startup phase of an Arabian-breeding operation is not
unreasonable. See Phillips v. Commissioner, T.C. Memo. 1997-128
(losses incurred in years 7 through 9 from the taxpayers’ Arabian
horse activity were incurred in the startup phase of the activity
and were due in part to unforeseen circumstances; losses did not
indicate that the activity was not engaged in for profit). In
the instant case, the years at issue are years 5 through 7 of
petitioners’ activity. Because petitioners’ losses were during
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