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Petitioner boarded his horses at a local stable and relied
extensively on the services of a David Costello (Costello) to
maintain and train his horses. The maintenance performed by
Costello consisted of typical physical labors associated with
horse ownership. Costello is a professional horse trainer and
has a national reputation in the cutting horse industry. He
owned and operated the stables and training facility used by
petitioner during the taxable years at issue.
Petitioner began deducting expenses associated with his
horse activity in 1979, its year of inception. The following
table lists the income, expenses, and losses reported by
petitioner during the 12-year period ending with 1992:
Year Gross Receipts Expenses Loss
1981 $0 $27,598 $27,598
1982 8,770 41,149 32,379
1983 15,050 49,715 34,665
1984 4,746 33,498 28,752
1985 1,949 33,397 31,448
1986 2,531 36,888 34,357
1987 12,580 72,858 60,278
1988 7,588 46,295 38,707
1989 3,927 37,414 33,487
1990 1,273 33,448 32,175
1991 167 33,438 33,271
1992 3,271 46,460 43,189
______ _______ _______
Total 61,852 492,158 430,306
Respondent determined that petitioner did not operate his
horse activity with the intent of earning a profit and disallowed
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