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section 195, and that petitioners had failed to adequately
substantiate the claimed expenditures.
(c) Depreciation
(1) 1991
On Schedules C of their respective tax returns for the
taxable year 1991, petitioners claimed the following combined
depreciation:
Assets placed in service before 1991 $11,044
Vehicles 1,930
Assets placed in service in 1991 1,536
Total depreciation 14,510
The claimed depreciation attributable to assets placed in service
before 1991 is as follows:
Placed in
Property Years Percentage Basis Service Deduction
20 horses 3 66.67 $77,000 1/1/88 $5,723
Business equipment 5 40.00 3,895 1/1/88 449
Computer & peripherals 540.00 5,405 1/1/88 669
Machinery & equipment 5 40.00 12,693 1/1/88 1,462
Nonlisted vehicles 5 40.00 7,600 1/1/88 876
Office furniture 7 28.57 1,200 1/1/88 150
Professional library20 7.50 4,125 1/1/88 272
3 horses 3 66.67 1,954 1/1/90 1,027
Farm tools 540.00 479 1/1/89 ---
Business equipment 5 40.00 643 1/1/90 359
Professional library20 7.50 526 1/1/89 ---
Professional library20 7.50 265 1/1/90 57
Total 11,044
Petitioners owned 19 horses when they commenced operation of
Arabian Hill on January 1, 1988. Petitioners had acquired 14 of
the 19 horses in question, and the remaining 5 were foaled at
Arabian Hill. Petitioners calculated the depreciable bases of
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