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horse activity, this tax benefit resulting from the activity does
not prove the absence of a profit motive. See Engdahl v.
Commissioner, 72 T.C. at 670. It is, however, a factor to be
considered. See Golanty v. Commissioner, 72 T.C. at 429.
The size of the horse-related expenditures in comparison to
petitioners’ adjusted gross income is substantial. In 1991,
1992, and 1993, petitioners reported wage income of $141,724,
$148,169, and $171,379, respectively. During those same years,
the horse activity lost $55,843, $70,598, and $64,886,
respectively.
Petitioners argue that the level of expenses compared to
their gross income favors their position since the amount is more
than one normally would spend on a mere hobby. Respondent
asserts that the substantial tax benefits, coupled with the
enjoyment petitioners derived from their horses, suggest the
activity was not engaged in for profit. We think there is some
truth to both parties’ assertions, but we do not fully agree with
either party.
This factor does not favor either party’s position in our
analysis.
9. Elements of Personal Pleasure or Recreation
The existence of personal pleasure or recreation relating
to the activity may indicate the absence of a profit objective.
See sec. 1.183-2(b)(9), Income Tax Regs.
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