- 26 -
and also provided him a double-wide trailer to live in and
allowed him personal use of a pickup truck. Mr. Hughes performed
the farm labor and Zane was the decision maker for the activity.
Zane decided to graze his cattle rather than confine them
because he believed that grazing positively affected the
longevity of the cattle. He also leased an additional 60 acres
of a farm adjacent to Columbus Dairy for the purpose of grazing
cows. All milk cows were grazed at the Columbus Dairy property
and on the adjacent leased land. Automatic milking equipment was
placed in service in October 2001, and milking operations
commenced during 2002. Zane began reporting the cattle activity
and deducting expenses in his 1998 tax year. Zane kept a
separate bank account for the Columbus Dairy.
Penalties--Reliance
Through the 2001 tax year, Mr. Kramer prepared Rance and
LaRhea’s tax returns. Mr. Kramer understood that one of the
purposes of the Oregon property was to raise and breed horses.
He believed that Rance and LaRhea purchased the Oregon property
on account of their concerns about “Y2K” and their desire to have
a self-sustaining facility. Mr. Kramer told Rance and LaRhea
from the beginning of their Schedule F activity that they needed
to show revenues in order to avoid “hobby loss classification”.
The only revenue Mr. Kramer was aware of was the sale of one
horse in the second or third year.
Page: Previous 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Next
Last modified: March 27, 2008