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Commissioner, 809 F.2d at 359. For a taxpayer’s books and
records to indicate a profit motive, the books and records should
enable a taxpayer to cut expenses, increase profits, and evaluate
the overall performance of the operation. See Abbene v.
Commissioner, T.C. Memo. 1998-330.
Although petitioners kept extensive financial records, they
were not used to review and reduce expenses or to enhance the
possibility of generating income. For example, Mrs. Knudsen
testified that a decision regarding termination of a breeding
line was made by considering whether an animal was producing
young and taking care of them. Petitioners did not introduce any
evidence that they used their financial and breeding records to
determine whether a specific breed was profitable. Further,
petitioners did not maintain records of revenues and expenses
associated with each animal or breed. See, e.g., Steele v.
Commissioner, T.C. Memo. 1983-63 (failure to keep track of
expenses for each animal implies lack of profit motive). Because
petitioners failed to use the existing books and records to
minimize their expenses or otherwise foster profitability, the
fact that they maintained records does not indicate that the
activity was carried on with a profit motive. See Sullivan v.
Commissioner, T.C. Memo. 1998-367 (maintenance of records
generally not indicative of profit motive where evidence did not
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