Harvey J. Davis and Patricia A. Davis - Page 27

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          had a substantial amount of income from sources other than horse            
          breeding but did not engage in the activity for pleasure; the               
          Court viewed the fact that the taxpayers spent 46 and 69 percent            
          of their adjusted gross income on the activity and derived                  
          insubstantial tax benefits as an indication that the activity was           
          not a hobby).                                                               
               This factor favors petitioners.                                        
               9.   Elements of Personal Pleasure                                     
               The presence of recreational or personal motives in                    
          conducting an activity may indicate that the taxpayer is not                
          conducting the activity for profit.  See sec. 1.183-2(b)(9),                
          Income Tax Regs.  A taxpayer's enjoyment of an activity does not            
          show that the taxpayer lacks a profit objective if the activity             
          is, in fact, conducted for profit as shown by other factors.  See           
          Jackson v. Commissioner, 59 T.C. 312, 317 (1972); sec. 1.183-               
          2(b)(9), Income Tax Regs.  However, if the possibility for profit           
          is small compared to the possibility for gratification, the                 
          latter possibility may be the primary motivation for the                    
          activity.  See White v. Commissioner, 23 T.C. 90, 94 (1954),                
          affd. per curiam 227 F.2d 779 (6th Cir. 1955).                              
               Respondent contends that petitioner derived great pleasure             
          from working with his horses, studying their bloodlines and the             
          history of the Arabian horse, and showing the horses in                     

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