- 44 -
property is not in the record.12 In addition, petitioner
disregards the value of her professional corporation, of
which she is the sole shareholder.
While the Court recognizes that, as long as tax rates
are less than 100 percent, there is no “benefit” to losing
money, see Engdahl v. Commissioner, 72 T.C. at 670,
deducting these losses significantly reduced the after-tax
cost of petitioner’s horse activity, see Hillman v.
Commissioner, T.C. Memo. 1999-255; Sullivan v. Commissioner,
T.C. Memo. 1998-367. Given the after-tax economics of
petitioner’s activity, petitioner’s significant annual wage
and rental income supports an inference that the activity
was not engaged in for profit. This factor weighs in favor
of respondent’s position.
9. Elements of Personal Pleasure or Recreation
The presence of personal or recreational motives in
conducting an activity may indicate that the taxpayer is not
conducting the activity for profit. McKeever v.
Commissioner, supra; sec. 1.183-2(b)(9), Income Tax Regs.
However, the fact that the taxpayer derives personal
pleasure from engaging in the activity does not show that
the taxpayer lacks a profit objective if the activity is, in
12 Petitioner did not establish to what extent, if any,
these properties are encumbered.
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