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the startup period of their activity, we conclude that this
factor is neutral.
7. Amount of Occasional Profits, If Any
The amount of any occasional profits the taxpayer earned
from the activity may show that the taxpayer had a profit motive.
See sec. 1.183-2(b)(7), Income Tax Regs. Petitioners did not
make a profit in any year. Petitioners concede that this factor
favors respondent.
8. Financial Status of the Taxpayer
The receipt of a substantial amount of income from sources
other than the activity, especially if the losses from the
activity generate large tax benefits, may indicate that the
taxpayer does not intend to conduct the activity for profit. See
sec. 1.183-2(b)(8), Income Tax Regs.
Respondent points out that petitioners had other sources of
income available to offset their losses from the horse activity.
Respondent points out that petitioners’ losses reduced their
taxable income by half in the years in issue.
Petitioners’ other sources of income totaled $57,596 in
1994, $60,215 in 1995, and $55,969 in 1996. They spent 40-50
percent of their income on their horse activity in the years in
issue. Of their losses, depreciation accounted for only 17.5
percent in 1994, 10.6 percent in 1995, and 9 percent in 1996.
See Eisenman v. Commissioner, T.C. Memo. 1988-467 (the taxpayers
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