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property. Moreover, of the 5 horses that petitioner maintained
during the subject years, one (Bogaz) was a gelding that she
maintained for 10 years before selling it and another (Silent
Reign) was a horse that she kept at the Falling Water Way
property for more than 5 years after selling it.
C. Changing Methods To Improve Profitability
A change of operating methods, adoption of new techniques,
or abandonment of unprofitable methods may also indicate a profit
objective. Sec. 1.183-2(b)(1), Income Tax Regs.
Petitioner alleges that she changed her method of operation
for the better when she stopped breeding horses from 1992 through
1996 on account of a depressed market and started breeding them
again in 1997 when she sensed that the market had improved. We
find no credible evidence to support petitioner’s claim that the
market for Arabian horses was depressed from 1992 through 1996 or
that it changed favorably for her in 1997. In addition, while
petitioner testified that she was making her horses well known
from 1992 through 1996 by showing them, she sold for
consideration only one of her horses after that period and that
was not until 5 years after the period ended.
Petitioner also alleges that she attempted to improve the
horse activity’s profitability by causing a reduction in the
operating expenses of the horse activity for the 4-year period
from 1997 through 2000, when compared to the 4-year period from
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