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of and time and effort expended by petitioners support a finding
that the activity was engaged in for profit.
Expectation That Assets Would Appreciate
Petitioners argue that the increase in the value of Sugar
Tree and the efforts they expended and expenses they incurred in
upkeep of the property support a conclusion that the horse-
boarding activity was engaged in for profit. We disagree. On
the issue of whether appreciation of land supports petitioners’
profit intent, the relevant inquiry is whether the holding of the
land for appreciation and the conducting of the horse-boarding
constitute a single activity or separate activities. Sec. 1.183-
1(d)(1), Income Tax Regs. Determining whether the two
undertakings are a single activity requires the examination of
all of the facts of the case; the most significant facts being
those that show the degree of organizational and economic
interrelationship of the undertakings. Id.
In this case, petitioners primarily purchased the land for
personal enjoyment and not to engage in a business. Therefore,
they had no bona fide intention, at the time of purchase, to
realize a profit that could offset later operating losses as they
had not yet contemplated any business using the property. Only
subsequent to the purchase did petitioners use the property in
their horse-boarding activities.
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