-3- identifying horses that could potentially become champion racehorses from their bloodlines. At all relevant times, John E. Judge was Super Horse's sole shareholder. Mr. Judge was also petitioners' accountant. In 1991, petitioner paid Super Horse $165,000 to acquire interests in five thoroughbred racehorses, as follows: Date of Purchase Horse Interest Price 1/17/91 U Gotta Bargain 50% $10,500 5/18/91 Dr. Bounty 50 13,000 5/18/91 Gypsy Pirate 66.6 14,000 8/25/91 All the Days 50 7,500 11/1/91 Orchesis 100 120,000 Total 165,000 Petitioner acquired his interests in these horses, believing that the horses could become champions based on their bloodlines. Super Horse trained these racehorses for petitioner. Petitioners' 1991 Schedule C On a Schedule C attached to their 1991 Federal income tax return, petitioners deducted $165,000 as research and development expenses.2 This deduction relates to the amount petitioner paid Super Horse to acquire his racehorse interests. Petitioners took the deduction on the advice of Mr. Judge. They did not claim a depreciation deduction for the racehorses. Notice of Deficiency 2 The deduction appears on line 27a, "Other expenses".Page: Previous 1 2 3 4 5 6 7 Next
Last modified: May 25, 2011