Eugene J. Phillips and Barbara A. Phillips - Page 13

                                       - 13 -                                         
          indicating profit objective with those indicating the lack of               
          such objective.  Sec. 1.183-2(b), Income Tax Regs.                          
               If gross income derived from a horse training or breeding              
          activity for 2 or more taxable years in a period of 7 consecutive           
          taxable years exceeds the deductions attributable to such                   
          activity, then the activity is presumed to be an activity engaged           
          in for profit.  Sec. 183(d).  In the instant case, as gross                 
          income from the activity did not exceed deductions from the                 
          activity during any of the years in issue, petitioners are not              
          entitled to the presumption that their horse activity was engaged           
          in for profit.  Consequently, we address the aforementioned                 
          factors to decide whether petitioners engaged in their horse                
          activity with an actual and honest profit objective during the              
          years in issue.                                                             
               The manner in which petitioners carried on their horse                 
          activity indicates that they engaged in the activity with the               
          requisite profit objective.  The regulations provide that                   
          "The fact that the taxpayer carries on the activity in a                    
          businesslike manner and maintains complete and accurate books and           
          records may indicate that the activity is engaged in for profit."           
          Sec. 1.183-2(b)(1), Income Tax Regs.  As to whether petitioners             
          carried on their horse activity in a businesslike manner,                   
          respondent concedes that petitioners engaged in the following               








Page:  Previous  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  Next

Last modified: May 25, 2011