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72 T.C. 28, 34 (1979). Startup losses and losses that result
from unforeseen circumstances do not necessarily show that a
profit objective was lacking. Engdahl v. Commissioner, 72 T.C.
659, 669 (1979).
Petitioners argue that their horse breeding activity did not
begin until 1976, just prior to the purchase of Emkay Asmara.6
Mr. Reimer testified that he could not recall whether the horse
breeding activity generated any net profit prior to 1992, and the
record shows that they failed to make a profit from 1992 through
1998. It appears that any minimal income generated from 1992
through 1995 came from “other income” including fuel tax credits
or refunds. From 1996 through 1998, petitioners generated sale
of livestock income of $30,900, about one-third of the losses
claimed in the time period, “custom hire” income of $41,605, and
“other income” of $8,220. The magnitude of the losses in
comparison with the revenues is an indication that petitioners
did not have a profit objective. See Burger v. Commissioner,
T.C. Memo. 1985-523.
At trial, Mr. Reimer testified that he would not have
entered the NAS activity if he did not intend to make a profit.
He further testified that he made many sales, “enough to keep us
alive"; however, the returns from 1992 through 1994, the year
6 For the purpose of this opinion, it is not necessary to
decide whether the activity began in 1971 or 1976 because the
years in issue are well beyond the seventh year in the activity.
See sec. 183(d).
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