Geraldine H. Pearson - Page 10

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               Petitioner did not use her records to evaluate how her farm            
          performed.  When asked if her farm was profitable based upon its            
          history of income and expenses, petitioner testified as follows:            
               I just don't know that I am really capable of analyzing                
               those figures.  It's not my field at all.  I really                    
               hate to get into something that is so alien to me as                   
               accounting, * * * that's why I've always given * * *                   
               all my things to an accountant to do.  I've never made                 
               out my own income tax returns.  I really don't * * *                   
               feel capable of even analyzing these charts * * *                      
               Petitioner testified that her position at Foxcroft increased           
          her ability to sell her horses.  We disagree.  Petitioner sold a            
          horse 1 month before becoming the headmistress of Foxcroft to an            
          Oregon buyer and gave two horses away in August 1989, but she did           
          not introduce any convincing evidence that she tried to sell                
          horses in Virginia.  Petitioner's agreeing to a 5-year commitment           
          in Virginia and her failure to show that she tried to sell her              
          horses while in Virginia detract from her claim that she ran her            
          farm with a profit objective.                                               
               Petitioner contends that the fact that she reduced the                 
          amount of her livestock in 1985 in response to changing market              
          conditions and added horticultural products in 1988 shows that              
          she had a profit objective.  Petitioner introduced no evidence              
          that these changes produced any income.  It is true that the                
          discontinuation of an unprofitable operation may suggest that the           
          activity was conducted in a businesslike manner.  See Seebold v             
          Commissioner, T.C. Memo. 1988-183.  However, petitioner's                   
          reduction of her livestock in 1985 and her addition of                      
          horticultural products in 1988 are not sufficient changes in her            

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