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any, which are earned; (8) the financial status of the taxpayer;
and (9) elements of personal pleasure or recreation. No single
factor is determinative, see sec. 1.183-2(b), Income Tax Regs.,
and not all factors are applicable in every case; see Allen v.
Commissioner, 72 T.C. 28, 34 (1979).
Petitioners assert that breeding and raising horses for
sale has long been recognized as a trade or business meeting the
profit requirements for deductibility, that a history of losses
during the startup phase of their enterprise does not vitiate
their profit motive, and that the objective facts demonstrate
that they had the requisite profit objective. Conversely,
respondent argues that the evidence demonstrates a lack of profit
motive and that petitioners’ horse activity was not engaged in
primarily for profit.
B. Applying the Factors
1. Manner in Which Activity Conducted
In deciding whether a taxpayer has conducted the activity
in a businesslike manner, we consider whether complete and
accurate books and records were maintained, whether the activity
was conducted in a manner substantially similar to other
activities that were profitable, and whether changes in operating
methods, adoption of new techniques, or abandonment of
unprofitable methods were made in a manner consistent with an
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