dissenting: I disagree with the action of the Board in holding that the losses sustained by the petitioners, Joseph E. Widener and George D. Widener, in maintaining and operating racing stables, are deductible from the respective gross income of the petitioners in each of the several taxable years.
Horse racing has long been called the “ sport of kings.” There is a well defined difference between sport and business. The one is pursued for personal pleasure, relaxation or recreation; the other is engaged in for the purpose of earning profits or as a means of livelihood. It is one of the characteristics of sport that it wastes capital. On the other hand a primary attribute of business is the conservation and increase of capital. Sport employs wealth to secure pleasure; business utilizes it to create more wealth. The motives that impelled one of these petitioners to enter the horse-racing business are set forth *663in the findings of fact as that “ He was fond of horses and wanted an outdoor occupation.” This does not suggest an intention to engage in a business for profit.
In the cases of both the Wideners there is in the record a very definite statement of receipts, expenses and losses for each of the taxable years, but there is no information as to the amount of capital employed. It is hardly possible to determine whether an enterprise is conducted as a business if the amount of the investment is not known. It is obvious from the figures here that unless the stables of the petitioners were heavily financed at the outset, the original capital was lost several times over prior to and during the taxable years. The huge annual deficit disclosed by the record must have been made good by equally huge additional capital contributions. This is a process aptly described in the speech of the common man as “ throwing good money after bad ” and is rarely indulged in by real business men. Ordinarily it is impossible in an enterprise carried on for profit or as a means of livelihood, but it is not at all an unusual procedure for those who, regardless of expense, pursue some sport, recreation or pastime for personal gratification. The excess-profits-tax law recognized the principle that capital employed in business for profit is entitled to a fair return before any income emerges. If these petitioners were in a position to claim an 8 per cent return on their capital investment and also to reduce their respective gross incomes by the amount of these alleged losses, it is plain that in time they might entirely avoid any payments to the public revenues, even though they were eventually in receipt of substantial annual receipts in excess of expenditures.
Certainly no one would contend that the fact that an enterprise sustains losses in a given year or even for a series of years is proof that it is not conducted for profit. Due to commercial conditions, crop failures, changes in an art, the vagaries of fashion or any one of numerous other causes, many men have found themselves forced to continue a losing business year after year in the hope of recouping their fortunes by some favorable turn of affairs. Such conditions do not exist here. These petitioners voluntarily engaged in an enterprise that is notoriously uncertain. They made good their losses and continued their operations after it was clear that there was little if any prospect of profit. The motives and purposes that governed them were not based either on the hope of or the desire for profits. They were willing to pay and able to pay for the pleasure which they derived from indulging in the “ sport of kings ” and doubtless the resulting personal gratification was ample compensation for the costs incurred.
The findings of fact, supra, indicate that racing rather than the breeding and sale of horses was the principal purpose for which *664these petitioners conducted their alleged business. It is recited that the employees of the stables included trainers, jockeys, blacksmiths, rubbers, exercise boys, and veterinarians. Services rendered by such men are peculiarly necessary in conducting a racing stable but they have a relatively small place in the organization and operation of a breeding farm. None of the so-called business activities of the petitioners during the taxable years appear to have resulted in profit or to have been conducted with any hope of profit. Had these enterprises been conducted for gain there should have been some sales of proved and winning horses at profitable prices. It appears however that only those animals that had been tested and found wantin^ in speed were sold. Apparently all the sales set forth in the record were made not for purposes of gain but to realize losses already manifest, in proved lack of racing qualities or to prevent further losses.
Only the taxable years 1919, 1920, 1921, and 1922 are involved in these appeals. It would seem therefore that the finding that after the results of the operations for 1919-1922, inclusive, were known, Joseph E. Widener reorganized his stables and made a greater effort to secure favorable results, is not pertinent here. The fact that some time after the last of the taxable years this petitioner imported a breeding sire from England and received large stud fees for the services of that animal has no relation to the issues now under consideration. For all that the record shows, this animal may not have been bought until some time in the year 1924. None of the amount of $110,000 earned as stud fees was received in either of the taxable years. Very rarely, if at all, should tax liability for a given year be determined by events occuring subsequent to such year.
The taxes here in controversy were imposed by act of Congress at a time when the republic was in desperate need of revenue. Every good citizen values the privilege of contributing to the public income in proportion to his ability to pay. Had Congress elected, as is within its power, to levy a tax on gross income, this and thousands of other tax disputes would have been avoided. For reasons that doubtless are sound and defensible, the law-making body chose to tax net income. This made it necessary to lay down rules governing credits, exemptions, and deductions.
In the statutes enacted for the guidance of all who have to do with the assessment and collection of Federal income taxes, there are provisions that each taxpayer is entitled to deduct from his gross income for any taxable year all the losses sustained and all the ordinary and necessary expenses paid or incurred in carrying on his trade or business in such year. The losses which these petitioners seek to deduct resulted from the payment of expenses incident to the conduct of racing stables. If such expenses are not in themselves deductible, *665neither are losses resulting therefrom. While the law nowhere says so in exact terms, it was obviously the intention of Congress to authorize the reduction of gross income by the cost of producing such income before the determination of tax liability. In this connection there is an express provision that personal expenses are not so deductible. This principle rests on the sound basis that business expenses represent the cost of producing income, while personal expenses relate only to the uses that are made of such income. The' deductions here claimed were not losses incurred in the production of any part of the income which the respondent proposes to tax, nor, in my judgment were they sustained in carrying on any trade or business for profit. They resulted from expenses purely personal to the petitioners.
I am convinced that Congress had incomes such as we have under consideration in mind when it provided that there should be no deduction from gross income on- account of personal expenses. To permit these petitioners and others of their type to reduce their tax liability by the deduction of the costs of maintaining racing stables, expensive estates, and other similar activities, would result in a shifting of the burden of public taxation which it seems to me would be wholly inconsistent with the public interest. I am satisfied that these petitioners have not sustained the burden of proof necessary for us to find that the alleged losses were sustained during the taxable years in a business conducted for profit. I feel that the allowance of the deductions claimed would be contrary to the intent of Congress, detrimental to the public interest and a dangerous perversion of the sound and equitable principles upon which just taxation must rest.