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E. Petitioners’ Financial Status
Substantial income from sources other than the activity in
question, particularly if the activity's losses generate
substantial tax benefits, may indicate that the activity is not
engaged in for profit. Sec. 1.183-2(b)(8), Income Tax Regs.
From 1991 through 1998, petitioners’ net profit from Dr. Prieto’s
medical practice averaged $638,253. This factor weighs against
petitioners.
F. Elements of Personal Pleasure
The absence of personal pleasure or recreation relating to
the activity in question may indicate the presence of a profit
objective. Sec. 1.183-2(b)(9), Income Tax Regs. Petitioners and
their children derived substantial amounts of pleasure from the
horse activity. Based on the facts of this case, we find that
this factor weighs against petitioners.
G. Additional Facts
The following additional facts also support our conclusion
that the horse activity was not entered with the primary,
predominant, or principal purpose of making a profit. The
evidence established that petitioners’ daughters mainly rode the
horses in equitation competitions. Equitation competitions grade
the rider and not the horse. Dr. Prieto also testified that he
went to the horse shows to watch his daughters compete.
Dr. Prieto testified that petitioners never purchased horses
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