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petitioners ended the activity, show that only losses were
carried.
This factor favors respondent’s position.
(7) The Amount of Occasional Profits, if Any, Which Are
Earned.
An occasional small profit from an activity that generates
otherwise consistently large losses may not be determinative that
the activity is conducted for profit, although an occasional
substantial profit may indicate a profit objective. Sec. 1.183-
2(b)(7), Income Tax Regs. From 1976 through 1998, at least 22
years of operation, petitioners’ horse breeding activity has
never produced a profit. See McKeever v. Commissioner, T.C.
Memo. 2000-288.
Petitioners failed to prove that they earned a profit from
the NAS activity from 1990 through 1994, the year they terminated
the activity. However, in reviewing petitioners’ returns in the
record, 1992 through 1994, we note that petitioners deducted
gross receipts of $4,871, costs of good sold of $7,625, and
expenses of $2,639, thus yielding a net loss of $5,393.
This factor favors respondent’s position.
(8) The Financial Status of The Taxpayer.
The lack of substantial income from other sources may
indicate a profit objective. Sec. 1.183-2(b)(8), Income Tax
Regs. Conversely, substantial income from other activities may
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