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some classes. Petitioner bought equipment to help her avoid
injury from her physical condition. Petitioner made capital and
fencing improvements, cared for cattle and sheep, marketed
horses, and expanded operations to include horticultural
products. Petitioner suffered unexpected losses during the years
in issue including theft of livestock, a decline in the sheep
market, and unanticipated repairs. Petitioner's farm was
producing cattle, sheep, and hay at the time of trial.
D. Petitioner's Records, History of Losses, and Tax Returns
Petitioner did not have a separate bank account for her
farm. Petitioner marked an asterisk on stubs of checks she used
for farm expenses. She maintained a separate ledger for her
farm. Petitioner's farm records were adequate to prepare her
tax returns. Petitioner did not keep or analyze her records to
evaluate how her farm performed.
Petitioner reported no Federal income tax liability from
1985 until the time of trial. Petitioner's tax returns were
prepared by William Holdner, a certified public accountant
(C.P.A.). Petitioner had income, deductions, and net farming
losses as shown in the chart below:2
Deductions Before Net Loss Before Net Loss Including
Year Income Depreciation DepreciationDepreciation Depreciation
1985 $20,461 $31,191 $10,730 $7,682 $18,412
1986 8,855 30,640 21,785 8,536 30,321
1987 3,019 29,389 26,370 7,061 33,431
2 The amounts for 1985 to 1993 are correct in the
stipulation but the totals are incorrect. The totals here are
correct.
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