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7. The Amount of Occasional Profits, If Any, Which Are
Earned
We next consider the amount of occasional profits, if any,
the taxpayer earned. Occasional profits the taxpayer earned from
the activity, in relation to the amount of losses incurred, the
amount of the taxpayer’s investment, and the value of the assets
used in the activity provide useful criteria in determining the
taxpayer’s intent. Sec. 1.183-2(b)(7), Income Tax Regs.
Petitioner contends that this factor should favor her
because she showed a profit in 2001, 2002, and 2003 from her
breeding activities. We place no weight on these “profits”. We
note that the “profit” in 2001 is due primarily to petitioner’s
capitalizing $70,000 of boarding costs that she had expensed in
prior years. If petitioner had treated the boarding costs in
2001 as she had in previous years, she would have shown a loss in
2001 as well. Moreover, no evidence was produced to substantiate
a profit in 2002 or 2003.
8. The Financial Status of the Taxpayer
We next examine petitioner’s financial status. If a
taxpayer does not have substantial income or capital from sources
other than the activity in question, it may indicate that the
activity is engaged in for profit. Sec. 1.183-2(b)(8), Income
Tax Regs. Conversely, substantial income from sources other than
the activity, especially if the losses generate large tax
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