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that the activity was not engaged in for profit. See sec. 1.183-
2(b)(6), Income Tax Regs. Petitioners’ mare, Miss Magical
Colors, and her foal died in 1994. Respondent contends that
their deaths were insignificant. We disagree. Miss Magical
Colors’ death represented a loss of 25 percent of petitioners’
breeding capability. This factor is neutral.
8. Financial Status of the Taxpayer
The receipt of a substantial amount of income from sources
other than the activity may indicate that the taxpayer does not
intend to conduct the activity for profit. See sec. 1.183-
2(b)(8), Income Tax Regs. Respondent contends that this factor
favors respondent because petitioners had a substantial amount of
income from sources other than the horse activity in the years in
issue. We disagree.
Petitioners’ nonfarm income decreased from $218,949 in 1995
to $135,594 in 1996. Petitioner retired in 1993, and Mr.
Strickland was scheduled to retire in 1998. Petitioners believed
that their annual income from sources other than their horse
activity would decrease. This suggests they had no long-term
need to shelter income after the startup phase. This factor is
neutral.
9. Elements of Personal Pleasure
The presence of recreational or personal motives in
conducting an activity may indicate that the taxpayer is not
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