Steven F. and Kathryn A. Dawson - Page 7

                                        - 7 -                                         
          bank account for the Activity.  Further, petitioners abandoned              
          the Arabian horse breeding business when Mr. Dawson realized that           
          it would be unprofitable.  Petitioners then sought a more                   
          profitable enterprise and decided to breed paint horses.  Their             
          goal was to develop Hot Twist into a marketable stud.                       
               Respondent contends that petitioners did not use business              
          records to evaluate the financial status of the Activity.  We               
          conclude that this contention does not necessarily undermine                
          petitioners' position.  Petitioners owned only three horses.                
          They employed only one trainer at a time, and only one horse was            
          shown in 1988.  No horses were shown in 1989.  We believe that              
          petitioners were adequately aware of the results of their rather            
          simple operation.  Their failure to establish that they analyzed            
          their books and records is not determinative of this issue.                 
          II.  Expertise                                                              
               Preparation for an activity by extensive study of its                  
          accepted business, economic, and scientific practices, or                   
          consultation with those who possess expertise in the activity,              
          may indicate that the taxpayer has a profit objective.  Sec.                
          1.183-2(b)(2), Income Tax Regs.                                             
               Respondent contends that petitioners did not consult experts           
          for advice regarding the operation of the Activity.  We, however,           
          believe Mr. Barton's uncontradicted testimony that petitioners              
          sought and received his advice.  While Mr. Dawson was not an                
          expert in the training, breeding, or showing of horses, he                  

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  Next

Last modified: May 25, 2011