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which is admittedly capital intensive. Conversely, respondent
contends that the continued losses in the cutting horse activity
were intended and used for a tax benefit by means of an offset to
Rance and LaRhea’s income. Considering the record as a whole, it
appears that the potential for tax benefits attributable to the
claimed losses from the activity was substantial. Considering
the fact that this was also a recreational activity, this factor
favors respondent’s determination.
9. Elements of Personal Pleasure--The presence of personal
motives, particularly when there are recreational elements
involved, may indicate that the activity is not engaged in for
profit. Sec. 1.183-2(b)(9), Income Tax Regs. Respondent points
out that Rance has been riding horses most of his life and
enjoyed his involvement with his cutting horse activities. He
rode horses in some competitions and had reentered the activity
because he enjoyed it and could afford it.
Rance contends that he was interested in the business
challenges and derived no personal pleasure from his involvement
in the activity. Rance admits that he enjoyed the activity, but
that his focus was winning competitions and producing a champion.
Here, again, the continuing losses without any apparent effort to
cut costs would tend to indicate a focus on the recreational
nature of the activity. Overall, this factor is unfavorable to
Rance and LaRhea.
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Last modified: March 27, 2008