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N Lark, and hoped that he would sire numerous offspring that
could be sold for profit. Scotch N Lark, however, died from an
undetectable illness. Despite the setbacks, petitioners’ herd
grew from 5 horses in 1997 to 41 horses in 2002.
On August 30, 2005, respondent sent each petitioner a notice
of deficiency relating to 2002. Respondent determined that the
activity was not engaged in for profit. On December 1, 2005,
while residing in Murphysboro, Illinois, each petitioner filed a
petition with the Court. On December 8, 2006, the cases were
consolidated for trial, briefing, and opinion.
Discussion
Section 183 limits the deductions relating to an activity
not engaged in for profit. Sec. 183(b). For purposes of section
183, a taxpayer engages in an activity for profit if he enters
into the activity with the actual and honest objective of making
a profit. The taxpayer's expectation of profit need not be
reasonable, but he or she must have a good faith objective of
making a profit. Allen v. Commissioner, 72 T.C. 28, 33 (1979);
sec. 1.183-2(a), Income Tax Regs.
Section 1.183-2(b), Income Tax Regs., sets forth a
nonexclusive list of nine factors to guide courts in analyzing a
taxpayer’s profit objective. The nine factors are: (1) The
manner in which the taxpayer carries on the activity; (2) the
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