Richard H. Daley and Estate of Anne H. Daley, Deceased, Richard H. Daley, Executor - Page 10

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          prior to undertaking his horse activity.  Respondent also                   
          contends that petitioner's failure to formulate a credible                  
          business or profit plan indicates that his actions were not                 
          businesslike and that he lacked a profit motive.  We agree with             
          both of these contentions.  While the law does not require a                
          taxpayer to engage in extensive formalities prior to undertaking            
          a venture, it does require that the taxpayer conduct a basic                
          investigation of the factors that would affect profit.  Golanty             
          v. Commissioner, supra at 432.  Although petitioner testified               
          that he started his horse activity after consultation with                  
          various professionals within the industry, such testimony was not           
          credible, and it appears that petitioner did little else in terms           
          of an investigation.  Petitioner undertook his horse activity               
          with no concept of what his ultimate costs might be or how he               
          might achieve any degree of cost efficiency.  Similarly,                    
          petitioner entered and conducted his activity not knowing the               
          amount of revenues he could expect or what risks might impair the           
          generation of such revenues.  It is quite likely that this stems            
          from his failure to consider any type of financial planning                 
          instrument during the course of his activity.  Moreover, at trial           
          petitioner was asked whether he was aware of the amount of losses           
          incurred since the inception of his horse activity.  Not only was           
          petitioner unaware of the amount of total losses incurred, but he           
          was also unaware of the amount of losses incurred during 1993,              
          the year immediately prior to trial.  It seems to us peculiar               




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