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during the workweek petitioners were not usually with the horses.
Accordingly, we do not accept petitioners’ testimony. See Wood
v. Commissioner, 338 F.2d 602, 605 (9th Cir. 1964), affg. 41 T.C.
593 (1964); Tokarski v. Commissioner, 87 T.C. 74, 77 (1986).
Accordingly, this factor also weighs against petitioners.
D. The Activity’s History of Income or Loss
A record of substantial losses over several years may be
indicative of the absence of a profit motive. Golanty v.
Commissioner, 72 T.C. at 426. As was noted by the Court on the
record at trial, the losses are large enough to be described as
substantial or huge. The only year petitioners did not report a
loss is 1996. This appears to be due to the incorrect reporting
of expenses for that year, and as we noted supra the likely
effect of the understatement of expenses was to create the
appearance of a profit for the horse activity when none in fact
existed. Petitioners’ losses from 1991 through 1998 averaged
well over $300,000 per year.
Furthermore, petitioners’ history of losses belies any
notion that it was operated for profit. While a person may start
out with a bona fide expectation of profit, even if it is
unreasonable, there is a time when, in light of the recurring
losses, the bona fides of that expectation must cease. See
Filios v. Commissioner, 224 F.3d 16 (1st Cir. 2000), affg. T.C.
Memo. 1999-92. This factor also weighs against petitioners.
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