Filios v. Commissioner

United States Court of Appeals
For the First Circuit
____________________

No. 99-2180

LOUIS A. FILIOS;
ESTATE OF EMMA L. FILIOS, DECEASED,

Petitioners, Appellants,

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent, Appellee.

____________________

ON APPEAL FROM A DECISION OF THE
UNITED STATES TAX COURT

____________________

Before

Torruella, Chief Judge,

Stahl and Lipez, Circuit Judges.

_____________________

Louis F. Brush for appellants.
Curtis C. Pett, Attorney, Tax Division, Department of Justice,
with whom Paula M. Junghans, Acting Assistant Attorney General, and Ann
B. Durney, Attorney, Tax Division, Department of Justice, were on
brief, for appellee.

____________________

August 18, 2000
____________________
 TORRUELLA, Chief Judge. This appeal arises from a decision

of the United States Tax Court finding petitioners Louis A. Filios and

Emma L. Filios liable for deficiencies in their 1992 and 1993 income

tax payments. The question presented to the Tax Court was whether

petitioner Louis Filios was pursuing horse racing and breeding for the

primary purpose of earning a profit during the years in question. The

Tax Court held that the requisite profit motive was lacking. See

generally Filios v. Commissioner, No. 15719-96, 1999 WL 163035 (T.C.

1999).

For the reasons stated below, we affirm the decision of the

Tax Court.

BACKGROUND

The Tax Court meticulously addressed the facts in this case.

See Filios, 1999 WL 163035, at *1-*5. That discussion, based

predominately on the parties' stipulation of facts, is amply supported

by the record. Accordingly, we largely reiterate it here.

I. Petitioners

Petitioners are Louis A. Filios and Emma L. Filios.

Petitioners were married and lived in West Springfield, Massachusetts,

when they filed the petition in this case. On March 12, 1997, Emma L.

Filios died. Petitioner Louis A. Filios is executor of the Estate of

Emma L. Filios. (Hereafter, references to petitioner are to Louis A.

Filios.)

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II. Westfield Gage Co.

In 1955, petitioner founded Westfield Gage Co., a corporation

which manufactures precision parts for airplanes and jet engines.

Since its inception, petitioner has been the company's president and

sole shareholder. Over the years, he generally worked seven or eight

hours per day at Westfield Gage.

Petitioner did not prepare a written business plan, conduct

economic or business studies, or hire consultants for Westfield Gage.

However, when the corporation was having financial difficulties,

Westfield Gage's treasurer, Eugene Kida, prepared budgets. In

addition, petitioner testified that, if Westfield Gage was losing

money, he would have sought advice on how to turn the business around.

He explained that Westfield Gage "had to make money . . . so I could

pay for my horses."

From 1979 to 1993, Westfield Gage had a total taxable income

of $8,842,137. It had gross receipts of $10,523,177 in 1992 and

$9,707,359 in 1993; net profits for the same years were $972,058 and

$102,470, respectively.

Mary Kuta was Westfield Gage's bookkeeper from 1955 to 1992.

She kept Westfield Gage's books and records, filed its quarterly tax

returns, and prepared its payroll. Eugene Kida, a certified public

accountant with a master's degree in business administration, worked

for Westfield Gage from 1984 to 1995 as company treasurer. Kida also

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prepared petitioners' personal income tax returns, which required that

he examine petitioner's horse racing and breeding records.

III. Petitioner's Horse Racing and Breeding Activity

Petitioner bought his first thoroughbred in 1955. In

general, he spent between ten and twenty hours per week engaged in

horse racing and breeding activities. Petitioner never trained or

stabled any of his horses at or near his home in West Springfield, he

did not own a farm or any equipment used to train his horses, and

neither he nor members of his family rode the horses. On average, he

retained his horses three to four years, giving him adequate time to

assess their racing potential. Petitioner's best horses generally ran

in races paying purses from $12,000 to $30,000.

A. Horse Publications

Dating back to 1959, and continuing through the years in

question, petitioner subscribed to various industry publications,

including The Blood Horse and Thoroughbred Record. In addition to

these periodicals, he read numerous horse racing and breeding books

during this time. He also studied The Blood Horse Stallion Register,

which was published annually. It contains information about

thoroughbred stallions, such as pedigrees, racing records, and racing

earnings. Petitioner used The Blood Horse Stallion Register to decide

which horses to breed and which to buy.

B. Vitamin and Mineral Supplements

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 Initially, petitioner's thoroughbreds were not high-quality

horses. He believed, however, that giving the horses vitamin and

mineral supplements would increase their value. To this end,

petitioner, by his own account, was one of the pioneers in using

nutrition and vitamin supplements as part of the diet for his stable of

horses. Petitioner personally decided which vitamins and minerals to

use, mixed them, and sent them to the trainers to give to the horses.

Petitioner did not, however, keep records showing which vitamins or

minerals he gave to each of his horses or the nutrition and diet of

each horse.

C. Breeding and Training

As indicated, petitioner spent ten to twenty hours per week

on his horse racing and breeding activity. He attended horse auctions

to buy and sell horses. He talked to breeders. He visited the farms

in Kentucky and tracks in New Jersey where he stabled his horses. He

reviewed mail, and he prepared the vitamin and mineral supplements for

the horses. In addition, petitioner signed all checks relating to the

activity and reviewed all of the track purse and race results.

Petitioner went to England, France, and Germany in 1977 on

a tour of breeding farms, race tracks, and training centers.

Petitioner also toured similar facilities in Ireland on a date not

specified in the record. Further, he took courses about horses at

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Cornell University in 1985, 1986, and 1990, and stud manager's courses

in 1964 and 1970.

D. Records and Reports

Westfield Gage (not petitioner) paid Mary Kuta to keep the

records for petitioner's horse racing and breeding activity from 1955

through 1993. The record indicates that prior to 1992, Kuta spent ten

to fifteen percent of her time working on the horse racing and breeding

activity, and part of this time was spent gathering information for

petitioner's tax returns. In 1992 and 1993, Kuta worked only on the

horse activity.

Kuta decided which records of the horse racing and breeding

activity to keep and how to keep them. Although petitioner conceded

that he did not know exactly what types of records Kuta maintained,

Harry Landry, a commercial race-horse breeder who was hired by

petitioner as an expert witness, opined that petitioner's records were

"excellent and meticulous" and were "very much in line with industry

practice."

Petitioner had a separate bank account for his horse racing

and breeding pursuits from 1963 through the years at issue. Kuta

maintained the expense records for these accounts. She kept copies of

canceled checks, check registers, invoices, and other correspondence.

Further, Kuta kept copies of invoices from petitioner's trainers and

from farms where his horses were stabled. She also kept statements

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from racetracks at which petitioner's horses raced showing the race

dates, his horses' standing in those races, and the total amounts that

his horses won. Although Kuta did not regularly prepare records

showing how much each horse earned, in a few of the years before the

years in issue, she prepared a summary at the end of the year showing

the earnings of each horse.

In addition, at the end of each year Kuta prepared summaries

from race track statements to ensure that the Forms 1099 issued by the

racetracks were accurate. She also used race track statements to

ensure that the various expenses charged to petitioner by the tracks,

such as jockey fees, were correct.

From 1959 to 1989, Kuta prepared disbursement spreadsheets

which showed expenses of the horse racing and breeding activity by

category. The spreadsheets were usually prepared at the end of the

year, from information in the check register, and were used both to

monitor expenses and for tax return preparation. In some years the

spreadsheets listed disbursements chronologically; in other years, the

spreadsheets listed disbursements by payee. The spreadsheets did not,

however, segregate expenses by horse.

Kuta prepared index cards on most of petitioner's horses from

around 1956 through the time of the trial which showed the name of the

horse, its year of birth, its sire and dam, when petitioner acquired it

and from whom, the purchase price, when petitioner disposed of the

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horse, and the name of the party acquiring the horse. Some index cards

showed whether the horse had a jockey certificate number, which the

horse needed in order to be eligible to race. Kuta prepared the index

cards in part to show Kida which horses were depreciable and which were

home-bred.

From 1974 to 1996 (excluding 1994), Kuta prepared yearly

breeding schedules for petitioner's mares. These schedules generally

included the name of each mare available for breeding, the name of the

stallion to which it was being bred, and the breeding fee. If the mare

was still carrying a foal from the prior year's breeding, the schedule

gave the name of the stallion. Kuta prepared the breeding schedules to

ensure that she had properly registered the foals and paid breeding

fees and to determine whether a refund was due.

The record indicates that petitioner never conducted written

business studies for his horse racing and breeding activity.

Similarly, he never prepared a written business plan or budget for the

activity.

E. Petitioner's Reliance on Others

Petitioner never hired business advisers or consulted with

experts on the economic aspects of a horse racing and breeding

operation. Petitioner did, however, use professional trainers,

veterinarians, horse farms, breeders, auctioneers, and jockeys.

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 Petitioner hired four to nine trainers each year from 1985

to 1993. Petitioner frequently called the trainers and talked to them

about which horses to race and which horses to train. He asked their

opinion, and he often followed their advice. Petitioner did not,

however, keep records regarding the performance or race results of the

trainers. Further, petitioner did not require his horse trainers to

submit plans of operations or any other written reports. The only

written reports that the trainers submitted to petitioner were informal

notes they occasionally made on their invoices. For example, trainer

George Handy wrote on his May 1992 invoice that "[c]olts are

progressing ok., Morgan Rd seems to learn much faster than Go Go Tiger,

both are galloping 1½ each day now."

Regarding the sale and purchase of horses, petitioner relied

on veterinarians, breeders, professional trainers, and auctioneers. It

is not clear whether petitioner relied on a trainer or breeder when he

decided which horses to breed; petitioner states that he did, but the

Tax Court seemed to indicate otherwise. The record does show that

petitioner personally arranged for his mares to be bred, and he

personally reviewed and executed the stallion contracts.

F. Petitioner's Breeding and Herd Management Program

Between 1955 and 1996, petitioner removed 124 horses from his

herd by selling or giving them away. Despite this, petitioner

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increased the size of his herd over time, which grew to a high of

eighty-four horses in 1990.

In the mid-1970s, in an effort to improve the quality of his

horses, petitioner began to send his mares to be bred by Kentucky

stallions which had excellent pedigrees but unproven racing records.

Later, in 1990 or 1993, petitioner changed his breeding strategy again

and began to use stallions with proven pedigrees and race performance.

G. Cost Controls

When asked about cost control measures, petitioner stated,

"I didn't change operating methods to decrease expenses, I changed

operating methods to make things better." Petitioner further testified

that he did not care how much he paid for a breeding fee, although he

did indicate that "[w]e'd try to get the best for the money."

Similarly, petitioner stated that his horses were easy to sell because

he kept lowering the price until they sold, or he would just give them

away. Finally, when asked why he continued to sink money into horse

racing and breeding, petitioner simply stated "I was determined to get

the best horse, and I practically did it, but I'm running out of it,

time."

IV. Petitioners' Income Tax Returns

Petitioners reported the horse racing and breeding activity

on their joint federal income tax returns each year from 1957 through

the years in issue. The following chart shows the amounts of gross

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receipts, expenses, and losses that petitioners reported on Schedules

C from 1957 to 1993:

Year Gross receipts Expenses Losses
--------- -------------- ------------ ------------
1957 None $12,919.36 $12,919.36
1958 5,575.00 25,268.34 19,693.34
1959 7,729.00 45,809.97 38,080.97
1960 4,805.00 53,429.56 48,624.56
1961 19,345.00 56,677.46 37,332.46
1962 4,280.00 48,705.54 44,425.54
1963 5,630.00 48,674.38 43,044.38
1964 25,666.00 56,735.85 31,069.85
1965 28,506.00 50,189.20 21,683.20
1966 34,717.00 58,908.42 24,191.42
1967 33,895.50 71,575.82 37,680.32
1968 43,903.70 79,234.31 35,330.61
1969 32,353.00 74,010.00 41,657.00
1970 35,722.00 69,917.00 34,195.00
1971 23,499.00 55,394.00 31,895.00
1972 19,637.00 51,524.00 31,887.00
1973 12,544.40 60,650.27 48,105.87
1974 21,347.00 77,845.15 56,498.15
1975 27,320.64 100,913.06 73,592.42
1976 44,028.00 118,674.00 74,646.00
1977 21,140.00 102,571.00 81,431.00
1978 58,662.00 132,278.00 73,616.00
1979 89,971.00 161,913.00 71,942.00
1980 60,651.00 180,943.00 120,292.00
1981 127,225.00 207,589.00 80,364.00
1982 78,804.00 213,686.00 134,882.00
1983 111,853.00 284,373.00 172,520.00
1984 106,814.00 354,937.00 248,123.00
1985 124,671.00 471,417.00 346,746.00
1986 111,295.00 545,642.00 434,347.00
1987 178,776.00 615,973.00 437,197.00
1988 136,327.00 672,014.00 535,687.00
1989 204,403.00 757,630.00 553,227.00
1990 116,400.00 774,735.00 658,335.00
1991 145,405.00 814,477.00 669,072.00
1992 136,463.00 814,103.00 677,640.00
1993 234,588.00 807,259.00 572,671.00
-------------- ------------ ------------
Total 2,473,951.24 9,128,595.69 6,654,644.45

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V. Prior Examinations

The Commissioner audited petitioners' 1977 federal income tax

return in 1980 and their 1984 return in 1987. The Commissioner made no

adjustments to those returns.

VI. The Proceedings Before the Tax Court

On April 24, 1996, the Commissioner sent a notice of

deficiency to petitioners stating that their federal income tax returns

were deficient in the amounts of $194,121 and $133,807 for 1992 and

1993, respectively. The notice further stated that petitioners were

liable for accuracy-related penalties pursuant to 26 U.S.C. § 6662 in

the amount of $38,824 for 1992 and $26,761 for 1993. On July 22, 1996,

petitioners filed a timely petition in the United States Tax Court for

a redetermination of the deficiencies and penalties.

Following a trial, the Tax Court entered its decision on July

7, 1999. The Tax Court held that petitioners were liable for the

deficiencies as assessed by the Commissioner, but that they were not

liable for the accuracy-related penalties for negligence. See

generally Filios, 1999 WL 163035. This appeal followed.1

DISCUSSION

The sole issue before this Court is whether the Tax Court

erred in ruling that petitioner's horse racing and breeding activity

1 The Commissioner does not appeal the Tax Court's finding that
petitioners are not liable for accuracy-related penalties.

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was "not engaged in for a profit." See Filios, 1999 WL 163035, at *8.

This is a finding of fact, which we will overturn only if it is clearly

erroneous. See Estate of Power v. Commissioner, 736 F.2d 826, 831 (1st

Cir. 1984).

The law in this case is not in dispute. Pursuant to Internal

Revenue Code section 183, if an "activity is not engaged in for profit,

no deduction attributable to such activity shall be allowed," 26 U.S.C.

§ 183(a), except "to the extent [of] the gross income derived from such

activity," id. § 183(b)(2). Treasury Regulation § 1.183-2(b) sets

forth nine factors for courts to consider in determining whether a

taxpayer had the requisite profit motive. These factors are: (1) the

manner in which the taxpayer carries on the activity; (2) the expertise

of the taxpayer or his advisors; (3) the time and effort expended by

the taxpayer in carrying on the activity; (4) the expectation that

assets used in the activity may appreciate in value; (5) the success of

the taxpayer in carrying on other similar or dissimilar activities;

(6) the taxpayer's history of income or losses with respect to the

activity; (7) the amount of occasional profits, if any, which are

earned; (8) the financial status of the taxpayer; and (9) elements of

personal pleasure or recreation. See Treas. Reg. § 1.183-(2)(b).

These factors are nonexclusive, see, e.g., Estate of Baron

v. Commissioner, 798 F.2d 65, 72 (2d Cir. 1986), and their application

depends on the facts presented by the individual case, see Treas. Reg.

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§ 1.183-2(b). In addition, no one factor controls; to the contrary,

"all facts and circumstances with respect to the activity are to be

taken into account." Id. Finally, it is the taxpayer's burden to

establish that she pursued her activity for the primary purpose of

making a profit. See, e.g., Westbrook v. Commissioner, 68 F.3d 868,

877 (5th Cir. 1995); Faulconer v. Commissioner, 748 F.2d 890, 893 (4th

Cir. 1984); Estate of Power, 736 F.2d at 828.

In this case, the Tax Court carefully analyzed each of the

factors set forth in Treasury Regulation § 1.183-2(b). See Filios,

1999 WL 163035, at *5-*8. The court concluded that most of the factors

strongly indicated that petitioner was pursuing horse racing and

breeding as a hobby, and none of the factors indicated that he was

pursuing the activity for the primary purpose of making a profit. See

id.

Specifically, the Tax Court determined that (1) petitioner

did not use financial projections, accounting records, or budgets to

control expenses, and he never made any significant changes in the way

he operated the activity despite recurrent losses; (2) petitioner and

his advisors had expertise in the mechanics of horse racing, but not in

the economic aspects of this activity; (3) petitioner devoted time to

horse racing and breeding, but he failed to demonstrate that it was

enough time to generate a profit; (4) petitioner failed to prove that

the value of his horses might increase enough to offset the losses he

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had incurred; (5) petitioner's financial success with Westfield Gage

was not relevant because it was not indicative of petitioner's ability

to run a profitable horse-racing business; (6) petitioner incurred

enormous losses totaling more than $6 million over thirty-seven years;

(7) petitioner's horse racing and breeding activity never generated a

profit; (8) petitioner was using his substantial income from Westfield

Gage to finance his horse-racing activity; and, finally, (9) while

petitioner did not ride the horses, he obviously enjoyed owning the

horses or he would have abandoned the activity long ago in the face of

enormous and continuous losses. See id.

Having carefully reviewed the record, we cannot say that the

Tax Court's findings are clearly erroneous. To the contrary, the

court's findings are amply supported by the record and invariably lead

to the conclusion that petitioner's horse racing and breeding activity

was not engaged in for profit. Under the circumstances presented by

this case, we see little point in reviewing each of the factors listed

in Treasury Regulation § 1.183-2(b). Instead, we will briefly examine

only the factors which we believe are truly at issue.

We begin with factor six -- the taxpayer's history of income

or losses with respect to the activity -- because we believe that in

this particular case, it is arguably the most telling. See Treas. Reg.

§ 1.183-2(b)(6). The Tax Court determined that the sheer magnitude of

petitioner's losses, the consistency with which they were incurred, and

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their steady and dramatic increase over an extended period of time

provided compelling evidence that petitioner was not engaged in horse

racing and breeding for the primary purpose of earning a profit. We

agree.

As the Tax Court correctly observed, petitioner never even

came close to realizing a profit during the thirty-seven years that he

pursued horse racing and breeding, and his total losses for that period

exceeded $6 million. Petitioner's contention that this is an

"isolated, non-recurring, marginally relevant fact[]" is disingenuous

and contrary to law. See Hendricks v. Commissioner, 32 F.3d 94, 99

(4th Cir. 1994) ("[A] record of continued losses over an extended

period of time is plainly relevant in discerning a taxpayer's true

motivation."). Further, the cases cited by petitioner are factually

inapposite. For example, in Metcalf v. Commissioner, 22 T.C.M. (CCH)

1402 (1963), the taxpayer abandoned his cattle farm after twenty-four

years of losses. Although the farm was continued after the normal

fifteen-year start-up phase of a cattle-breeding operation, the

taxpayer was constantly changing the way in which he did business in an

effort to increase income and cut the costs of operation. See id. at

1410-11. When this ultimately proved unsuccessful, the taxpayer

abandoned the activity. See id. Here, petitioner has not abandoned

his horse racing and breeding activity after thirty-seven years of

enormous, uninterrupted, and ever-increasing losses. Consequently, we

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believe it is beyond reasonable dispute that factor six -- petitioner's

history of losses with regard to his horse racing and breeding activity

-- clearly supports the Tax Court's ruling that the requisite profit

motive was lacking.

Likewise, we find factor four, the likelihood of asset

appreciation, and factor seven, the amount of occasional profits,

equally persuasive. Treasury Regulation § 1.183-2(b)(4) provides that

the term "profit" encompasses appreciation in the value of the assets

used in the activity. Treasury Regulation § 1.183-2(b)(7), in turn,

provides:

An occasional small profit from an activity
generating large losses, or from an activity in
which the taxpayer has made a large investment,
would not generally be determinative that the
activity is engaged in for profit. However,
substantial profit, though only occasional, would
generally be indicative that an activity is
engaged in for profit, where the investment or
losses are comparatively small. Moreover, an
opportunity to earn a substantial ultimate profit
in a highly speculative venture is ordinarily
sufficient to indicate that the activity is
engaged in for profit even though losses or only
occasional small profits are actually generated.

Petitioner concedes that there are no occasional profits in

this case. He asserts, however, that his profit motive may be inferred

from the speculative nature of the horse business. He notes in this

regard that highly successful racehorses not only win large purses but

also dramatically increase in value due to their potential to earn

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lucrative stud fees. The Tax Court carefully considered this argument,

citing the testimony of petitioner's expert, which indicates that three

to five percent of those in the horse racing and breeding business make

about $775 million a year. See Filios, 1999 WL 163035, at *7. The

court determined, however, that this testimony alone was not

conclusive, "absent evidence showing what other horse operations did to

become profitable." Id. We see no error in this determination.

On this point, we believe that Hendricks v. Commissioner is

instructive. In Hendricks, the court stated:

[T]he mere expectation that land values may
appreciate is not sufficient, in itself, to
demonstrate that an activity was engaged in for
profit. Thus, while Hendricks indicated that he
generally expected his land to appreciate in
value, "such a notion, without any probative
foundation, is not enough to support a profit
motive and, in particular, a contention that the
appreciation could be anticipated to be
sufficient to recoup petitioner's farming
losses."

32 F.3d at 100 (quoting Keelty v. Commissioner, 47 T.C.M. 1455 (1984)).

Here, petitioner's belief that one or more of his horses might achieve

great success was at best a "mere expectation" utterly lacking in "any

probative foundation." Id. As we have indicated, petitioner made no

attempt to show that his horse racing and breeding activity was similar

to horse operations that generate substantial profits. Accordingly, we

conclude that petitioner has failed to carry his burden of proving that

he had a bona fide expectation of either (1) asset appreciation or (2)

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a small chance to make profits sufficient to offset the enormous losses

he had accumulated. Therefore, the Tax Court correctly concluded that

neither factor four nor factor seven favors petitioner.

We turn next to the first factor -- the manner in which the

activity was conducted. Treasury Regulation § 1.183-2(b)(1) states

"[t]he fact that the taxpayer carries on the activity in a businesslike

manner and maintains complete and accurate books and records may

indicate that the activity is engaged in for profit." Pursuant to this

provision, courts should also consider (1) whether "an activity is

carried on in a manner substantially similar to other activities of the

same nature which are profitable," -- which we have already indicated

numerous times petitioner failed to do -- and (2) if the taxpayer has

changed operating methods to improve profitability. Id.

The Tax Court found that petitioner's recordkeeping failed

to indicate a profit motive. See Filios, 1999 WL 163035, at *5. The

court reasoned that "[p]etitioner did not have budgets, income

statements, balance sheets, income projections, or financial statements

for the activity other than those compiled annually by petitioners'

accountant to prepare their annual Federal tax returns." Id. Once

again, we see no basis for saying that the Tax Court clearly erred.

In general, records that indicate a profit motive are ones

that can be used for the purpose of cutting expenses, increasing

profits, and evaluating the overall performance of a business on an

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ongoing basis. See, e.g., Westbrook, 68 F.3d at 878 (activity not

carried on in a businesslike manner where cost estimates, financial

projections, and estimates on the return on capital invested were

lacking); Burger v. Commissioner, 809 F.2d 355, 359 (7th Cir. 1987)

("[B]ecause the taxpayers had no system to monitor expenses or losses,

the petitioners could not make informed business decisions."). As the

Tax Court correctly determined, these types of records are totally

lacking in this case.

Further evaluating factor one -- the manner in which the

activity was conducted -- the Tax Court also concluded that

"[p]etitioner's method of operations generally continued unchanged for

more than 30 years." Filios, 1999 WL 163035, at *6. The court

acknowledged, however, that between 1955 and 1993, petitioner

increased the size of his herd and changed his breeding practices

twice. We do not necessarily agree with the Tax Court that these

changes are de minimis. Nevertheless, we need not consider this point

further. Our conclusion regarding petitioner's records, in addition to

petitioner's failure to introduce any evidence favorably comparing his

activity to a profitable horse racing and breeding operation, leads us

to conclude that the weight of the evidence supports the Tax Court's

ruling that factor one favors the Commissioner.

Finally, we turn to factor two – the expertise of the

taxpayer or his advisors. Treasury Regulation § 1.183-2(b)(2) states

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that "[p]reparation for the activity by extensive study of its accepted

business, economic, and scientific practices, or consultation with

those who are expert therein, may indicate that the taxpayer has a

profit motive where the taxpayer carries on the activity in accordance

with such practices." The Tax Court found that, although petitioner

read horse publications, attended horse breeding seminars, and used

professional trainers, veterinarians, horse farms, breeders,

auctioneers, and jockeys, he did not prove that he possessed the

requisite expertise regarding the business end of the activity, or that

he relied on the advice of others who possessed that type of expertise.

See Filios, 1999 WL 163035, at *6. This determination is amply

supported by both the record and the law. See, e.g., Westbrook, 68

F.3d at 878 ("Although the [taxpayers] studied and consulted experts

regarding the technical and scientific aspects of horse and cattle

raising, they did not seek expert advice regarding the economic or

business aspects of these activities."); Burger, 809 F.2d at 359 ("The

taxpayers' failure to consult economic experts or develop an economic

expertise themselves is another fact that indicates a lack of a profit

motive in this case."). Consequently, the Tax Court correctly found

that factor two does not favor petitioner.

Given the record in this case, we believe that any further

analysis is unnecessary. In our view, the Tax Court reasonably

determined that of the nine relevant factors, seven weighed against

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petitioner, two were neutral, and none weighed in favor of petitioner.

See Treas. Reg. § 1.183-2(b). It would be improper for us to re-weigh

the evidence, see Estate of Power, 736 F.2d at 831, and we simply

cannot say that the Tax Court's findings are clearly erroneous.

Accordingly, we affirm the Tax Court's ruling that petitioner's horse

racing and breeding activity was "not engaged in for a profit." See

Filios, 1999 WL 163035, at *8.

CONCLUSION

For the reasons stated above, we affirm the decision of the

Tax Court.

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