- 41 -
and 2000. Petitioner’s losses after the years in issue only
confirm the general pattern of losses. See Dodge v.
Commissioner, supra. Given what has occurred since
petitioner reported a profit in 2001, no positive inference
can be made from the decline in losses before 2001.
Petitioner’s history of losses indicates that her horse
activity was not engaged in for profit. This factor weighs
heavily in favor of respondent’s position.
7. The Amount of Occasional Profits, If Any, Which
Are Earned
The amount of profits in relation to the amount of
losses incurred may provide a useful criterion in evaluating
whether the taxpayer engaged in the activity for profit.
McKeever v. Commissioner, supra; Dodge v. Commissioner,
supra; sec. 1.183-2(b)(7), Income Tax Regs. The regulations
go on to state:
substantial profit, though only occasional, would
generally be indicative that an activity is engaged in
for profit, where * * * losses are comparatively small.
Moreover, an opportunity to earn a substantial ultimate
profit in a highly speculative venture is ordinarily
sufficient to indicate that the activity is engaged in
for profit even though losses or only occasional small
profits are actually generated.
Sec. 1.183-2(b)(7), Income Tax Regs. (emphasis added).
Petitioner has not generated a “substantial” profit.
In the 16 years petitioner has operated her horse activity,
she reported a profit in 1 year of only $209, compared to
Page: Previous 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 NextLast modified: May 25, 2011