Paula L. Wilson - Page 5

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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.                              
               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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