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Consequently, petitioners’ long stream of losses with regard to
their cattle-raising and deer operations militates against a
finding of profit motive.6
7. The Amount of Occasional Profits Earned, If Any
If an activity generates only small, infrequent profits and
typically generates large losses, the taxpayer conducting the
activity may not have a profit objective. See Golanty v.
Commissioner, supra at 427; sec. 1.183-2(b)(7), Income Tax Regs.
In this context, profit means economic profit, independent of tax
savings. See Seaman v. Commissioner, 84 T.C. 564, 588 (1985).
Petitioners’ cattle-raising and deer operations achieved a
profit only once in more than 20 years. And the record indicates
that losses from these operations will continue for the foreseeable
future.
8. Taxpayer’s Financial Status
Substantial income from sources other than the activity in
question, particularly if the losses from the activity generate
substantial tax benefits, may indicate that the activity is not
engaged in for profit. See Hillman v. Commissioner, T.C. Memo.
1999-255; sec. 1.183-2(b)(8), Income Tax Regs.
For 1992, 1993, and 1994, petitioners had $572,164, $839,000,
6 We note that during the years in issue, Byron Kahla’s
salary was paid by United but not deducted on petitioners’
Schedule F. Had Byron Kahla’s salary been deducted as a Schedule
F expense, petitioners’ Schedule F losses would have been
greater.
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