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the assets in use may indicate a profit objective. See sec.
1.183-2(b)(7), Income Tax Regs. Absent actual profits, the
opportunity to earn substantial profits in a highly speculative
venture may be sufficient to indicate that the activity is
engaged in for profit. See id.; see also Dawson v. Commissioner,
T.C. Memo. 1996-417 (taxpayer’s belief that a champion horse
could generate a substantial amount of revenue and
correspondingly large profits may be probative of a profit
objective).
Petitioner speculates that an Arabian stallion could earn
substantial income through stud/breeding fees or syndication.
Thus, petitioner concludes, the possibility of earning a large
ultimate profit in the horse activity justifies her pursuit.
Petitioner notes that she recognized a profit in 2001 by selling
a “home-bred gelding” and states that the asset value of her
activity also has appreciated over the course of its operation.
Petitioner argues that this factor favors her. We disagree.
First, petitioner acknowledges in her brief that the record lacks
evidence concerning the number of mares that a stallion can breed
each year and the syndicated values of purebred Arabian
stallions. While she asks the Court to draw a “logical inference
that Arabian stallions could earn substantial income, and/or be
syndicated (have ownership divided) for profit potential of a
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