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Moreover, we note that the variable costs of petitioners’
horse-boarding activities, including fees, veterinarian care,
etc., exceeded the gross income produced by the activities, with
the result that the horse-boarding activities do not meet the
test imposed under the regulation pertaining whether such
activities will be integrated. See sec. 1.183-1(d)(1), Income
Tax Regs. Accordingly, we believe, in this case, that their
holding the property for appreciation and horse-boarding are
separate activities. See sec. 1.183-2(b)(4), Income Tax Regs.;
Engdahl v. Commissioner, 72 T.C. 659 (1979); Allen v.
Commissioner, 72 T.C. 28 (1979). Irrespective of this
conclusion, however, we do not believe that petitioners’
inability to argue the appreciation of their land is ultimately
determinate on the issue of whether the horse-boarding activity
was engaged in for profit.
Financial Status of the Taxpayers
The fact that petitioners have substantial income from
sources other than the activity at issue may indicate that the
activity was not engaged in for profit. Cf. Engdahl v.
Commissioner, 659, 670. Respondent argues that Mr. Rozzano’s
income from his job in executive management was sufficient to
absorb the expenses in operating Sugar Tree, indicating that it
was not operated for profit. We disagree. As previously stated,
these out-of-pocket expenditures were 34 percent and 46 percent
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