Brad and Teri Montagne - Page 9

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          opinion 647 F.2d 170 (9th Cir. 1981).  This Court has recognized            
          that the startup phase of a horse breeding activity is 5 to 10              
          years.  Engdahl v. Commissioner, 72 T.C. 659, 669 (1979).  The              
          1997 and 1998 losses were incurred within the recognized period             
          of the startup of a horse breeding activity.  This factor                   
          therefore does not weigh against petitioners’ having a profit               
          motive.                                                                     
               F.  The Amount of Occasional Profits                                   
               The amount of occasional profits, if substantial in relation           
          to losses incurred or the taxpayer’s investment, may indicate a             
          profit objective.  See sec. 1.183-2(b)(7), Income Tax Regs.                 
          Petitioner testified that he earned a small profit from the horse           
          activity in 2000; however, he produced no evidence to support               
          this assertion.  Petitioners incurred losses in 1997 and 1998 far           
          in excess of the small profit that petitioner claimed to have               
          realized in 2000.  Therefore, the relatively small amount of                
          profit petitioners purportedly realized does not indicate a                 
          profit motive.                                                              
               G.  Petitioners’ Financial Status                                      
               Substantial income from sources other than the activity in             
          question, particularly if the activity’s losses generated                   
          substantial tax benefits, may indicate that the activity is not             
          engaged in for profit.  Sec. 1.183-2(b)(8), Income Tax Regs.                
          Petitioner operated his chiropractic practice as a sole                     






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