- 47 -
8. Taxpayer’s Financial Status
The fact that a taxpayer does not have substantial income or
capital from sources other than an activity may indicate that the
activity is engaged in for profit. See sec. 1.183-2(b)(8),
Income Tax Regs. The fact that a taxpayer does have substantial
income from sources other than an activity, on the other hand,
may indicate that the activity is not engaged in for profit. The
latter is especially true where losses from the activity generate
substantial tax benefits or where there are personal or
recreational elements involved. Sec. 1.183-2(b)(9), Income Tax
Regs.
Petitioner asserts that she is an upper middle class
individual who has invested a substantial portion of her income
in the horse activity for the purpose of securing a source of
retirement income and that the amount of this investment is
inconsistent with the pursuit of a hobby. Petitioner concludes
that this factor weighs in her favor. We disagree. Petitioner
had a steady and substantial stream of cash/income from
activities other than the horse activity; e.g., her work as a
dentist and her leasing of property to Giles Inc. Her financial
status allowed her to participate in the horse activity, an
otherwise expensive recreational activity that allowed her to
enjoy her lifelong pleasure of interacting with horses, while at
the same time receiving a subsidy for this activity from the
Page: Previous 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 NextLast modified: May 25, 2011