Richard H. Daley and Estate of Anne H. Daley, Deceased, Richard H. Daley, Executor - Page 6

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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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