6
expenditures and the method of payment--for instance, a charge at
a gas station or a cash payment to a veterinarian. Petitioner
made summaries from the logs that he used to gauge operations,
and they were also used to prepare the tax returns. At the end
of the year, the summaries were given to the tax return preparer.
The parties herein agreed in writing that the contents of certain
stipulated documents relating to the ranch were the authentic
documents that were kept, but they were not stipulated to be
accurate. The summaries were not always accurate or complete.
Petitioner maintained records of purchase and registration
documents for many of the horses and longhorn cattle that were
sold. Petitioner did not introduce contemporaneously made
records of sales of the ponies. Petitioner introduced no records
regarding contract labor, nor did he issue Forms 1099 or W-2 to
such employees, although such forms were maintained by the
medical corporation, which paid petitioners their salaries and
hired a payroll company.
There was a small amount of gross income from various
activities at the ranch. Although there were few horse sales,
there were various other sales of cows, calves, rabbits, goats,
and bulls. Petitioner leased "Bryan the Buffalo" in 1988 and
1989 for a total of $969. Finally, there was some rental income
from the guest cabins located on the ranch. Petitioners reported
the following losses and income on their joint returns for the
years 1986 through 1992:
Petitioner's
Gross Income From
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