- 30 - and conferences instructed them on how to run a successful animal breeding business. Petitioners did not consult a business adviser, prepare budgets, or implement a business plan. Petitioners may have become well educated in exotic animal breeding, but they did not establish an acquired expertise in operating a profitable animal breeding business. On several occasions, petitioners failed to investigate the profitability of a breed before purchasing an animal. Mrs. Knudsen purchased two Clydesdale horses without knowing what the selling price of their offspring would be, and she purchased other animal breeds that were unfit for the Kansas climate. In addition, Mrs. Knudsen purchased animals without receiving any health information on them. On balance, we conclude that petitioners did not have, and did not acquire from others, expertise in the economics of the exotic animal breeding business. This factor favors respondent’s position. 3. Petitioners’ Time and Effort Devoted to the Activity The fact that a taxpayer devotes personal time and effort to carry on an activity may indicate an intention to derive a profit, particularly where there are no substantial personal or recreational elements associated with the activity. See Daley v. Commissioner, T.C. Memo. 1996-259; sec. 1.183-2(b)(3), Income Tax Regs. A taxpayer’s withdrawal from another occupation to devotePage: Previous 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 NextLast modified: March 27, 2008