-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