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Regs.;5 (d) that petitioner did not report any profits with
respect to his horse activity in any year of operation and that
such losses extended for a period beyond a reasonable startup
period, see sec. 1.183-2(b)(6) and (7), Income Tax Regs.; (e)
that petitioner offset most of his net income from his C.P.A.
practice, net rental income from outside parties, and other
dividend and interest income with the horse activity losses, and
that petitioner created net operating losses to be used to reduce
future potential capital gains from the sale of petitioner’s real
estate properties; and (f) that petitioner realized significant
personal and social benefit from the horse activity, see sec.
1.183-2(b)(9), Income Tax Regs.
Respondent’s revenue agent also concluded that petitioner’s
activity was not engaged in for profit pursuant to the
presumption under section 183(d) because the gross income derived
from the horse activity did not exceed the deductions
attributable to that activity for 2 or more of the most recent 7
consecutive taxable years. Specifically, the agent concluded
5 In particular, the revenue agent determined that the real
estate property used in the horse activity, which had appreciated
in value since its purchase in the late sixties or the early
seventies, was not owned by EIP, but rather owned personally by
the taxpayer.
Further, the revenue agent determined that as of the end of
1995, petitioner’s horses were worth just over $30,000 (compared
to his losses for the activity to date that were well in excess
of $175,000).
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