Roger G. Cotner and Marlan W. Cotner - Page 5

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          maintenance of Daisy in the amount of $7,714.07.  Included in               
          this amount are the following expenditures:                                 
                    Expenditures        Explanation                                   
                    $4,583.00           - stud fee; boarding and care for             
                                        Daisy; and boarding & care of Sassy           
                                        during pregnancy.                             
                    3,131.07            - costs to maintain horses, plus a            
                                       moving expense.                               

               In February of 1990, petitioners sold Daisy for $1,400.                
          Daisy was sold at the approximate age of 22 months.  A dressage             
          horse reaches its peak value between age 12 and 14, and only                
          after extensive training.  Petitioners did not provide any                  
          training to Daisy between her birth in 1988 and sale in 1990,               
          nor did they enter Daisy in any dressage competitions prior to              
          sale.  Petitioner testified that personal, family matters                   
          precluded her from spending the time with Daisy that would have             
          been necessary to train the horse for dressage riding.                      
                                       OPINION                                        
               Petitioners claim that they incurred a loss on the sale of             
          Daisy and that, pursuant to section 165(c)(2), they are entitled            
          to deduct the loss as a long-term capital loss.  In calculating             
          the amount of the long-term capital loss petitioners computed               
          their cost basis in Daisy by taking into account all of the                 
          expenditures incurred in connection with Daisy's care.                      
          Respondent offers a variety of reasons why petitioners are not              
          entitled to the deduction here in dispute.                                  




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