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History of Income or Losses
A history of substantial losses may indicate that an
activity is not conducted for profit. See Golanty v.
Commissioner, supra at 427; sec. 1.183-2(b)(6), Income Tax Regs.
However, if the losses occur during the startup phase of an
activity, the losses do not necessarily indicate a lack of profit
objective. See Engdahl v. Commissioner, 72 T.C. at 669.
We have found that the startup phase of a horse-breeding
activity may be 5 to 10 years. See id.; Davis v. Commissioner,
T.C. Memo. 2000-101; Phillips v. Commissioner, T.C. Memo. 1997-
128.
Because petitioner began her horse activity in 1996, the
losses petitioner incurred during the years in issue may still be
considered part of the startup phase. We treat this factor as
neutral.
The Amount of Occasional Profits
The amount of occasional profits a taxpayer earns from an
activity may show that the taxpayer has a profit objective. Sec.
1.183-2(b)(7), Income Tax Regs. While petitioner realized no
profits, we treat this factor as neutral because, as stated,
losses are not unreasonable during the startup phase of a horse-
breeding activity. See Strickland v. Commissioner, T.C. Memo.
2000-309.
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