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any time before or after the years in issue. This factor weighs
against petitioner.
7. The Amount of Occasional Profits, if any, Which Are
Earned
The amount of profits earned in relation to the amount of
losses incurred, the amount of the investment, and the value of
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 speculated that he could have earned substantial
income through breeding NTS. Petitioner purchased NTS because he
was a special stallion, one of two grandchildren of a 10-time,
world champion, Appaloosa horse. When petitioner purchased NTS,
he believed that this stallion could sire foals ranging in value
from $5,000 to $20,000, depending on the foal’s age. Yet
petitioner provided no proof of the Appaloosa breed’s ability to
command a price of $5,000 to $20,000 per foal. This factor
weighs against petitioner.
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