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petitioners’ horses were of the quality to generate top prices in
the classic fino market. Even as late as the time of trial,
petitioners had yet to show any of their horses at the national
paso fino horse shows. During the years at issue, petitioners
advertised their horses for sale at local feed stores and in
classified ads in various horse publications. Petitioners’ sales
and marketing efforts were extremely limited and directed
primarily, if not exclusively, toward the local and regional
market. Petitioners’ conduct during the years at issue simply
does not support their assertion that a speculative profit in an
amount sufficient to offset their accumulated losses from prior
years was attainable by selling a national champion classic fino
horse from their herd.
This factor favors respondent’s position.
8. Financial Status of Petitioners
That the taxpayer does not have substantial income or
capital from sources other than the activity in question may
indicate that the activity is engaged in for profit. See sec.
1.183-2(b)(8), Income Tax Regs. Substantial income from sources
other than the activity may be indicative of a lack of profit
motivation, particularly where there are elements of personal
pleasure or recreation involved. See id.
Although petitioners were able to reduce their taxable
income by approximately $60,000 per year as a result of their
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