- 18 - broodmares. They tried to keep costs as low as possible. This factor favors petitioners. 2. The Expertise of the Taxpayers or Their Advisers Efforts to gain experience, a willingness to follow expert advice, and preparation for an activity by extensive study of its practices may indicate that a taxpayer has a profit motive. See sec. 1.183-2(b)(2), Income Tax Regs. Respondent contends that petitioners did not seek or have the economic expertise necessary to operate the horse activity profitably. Respondent points out that petitioners did not show a profit from 1993 to 1996, and that none of the material that petitioners reviewed or experts with whom they talked addressed how to make a profit or minimize losses. Petitioner knew a lot about breeding, raising, training, boarding, buying, and selling of horses and the costs associated with those actions. Mr. Strickland had extensive business experience. Petitioners read books and periodicals, viewed videotapes, attended seminars, and consulted with experts. We believe that petitioners had the expertise to conduct a profitable horse activity. This factor favors petitioners. 3. Taxpayer's Time and Effort The fact that a taxpayer devotes much time and effort to conducting an activity may indicate that he or she has a profit objective. See sec. 1.183-2(b)(3), Income Tax Regs.Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Next
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