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b. Conduct Substantially Similar to That of Other
Profitable Activities
When the taxpayer conducts the activity in a manner
substantially similar to that of other activities of the same
nature which are profitable, a profit motive may be indicated.
Engdahl v. Commissioner, supra at 666-667; sec. 1.183-2(b)(1),
Income Tax Regs. Petitioner presented no evidence on how
profitable horse breeding operations are run. However, generally
relevant indicators may include advertising, maintaining a
separate business bank account, developing a written business
plan, and having a plausible strategy for earning a profit. See
Morley v. Commissioner, T.C. Memo. 1998-312; Butler v.
Commissioner, T.C. Memo. 1997-408; De Mendoza v. Commissioner,
T.C. Memo. 1994-314; Ellis v. Commissioner, T.C. Memo. 1984-50.
In the 11 years prior to the years in issue, petitioner
deducted less than $2,800 of advertising and promotion costs.
During the years in issue, petitioner did not advertise in trade
magazines, journals, or other publications, and she deducted no
advertising or promotional costs on her Schedules C. Petitioner
testified that she felt showing horses was the best form of
advertising and used competitions as her primary method of
promotion.
The Court recognizes that showing horses may be one method
of advertising. However, given that petitioner’s activity is
breeding and selling horses, and that petitioner sold only one
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