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As to the calculation of income that would be required in
future years to produce a profit, Mrs. Phillips testified that
she hoped that the horse activity would be profitable within 6 to
8 years after petitioners began focusing on Arabians.
Petitioners calculated the cost of each component of their horse
activity, categorizing their expenses in their farm books under,
inter alia, "Labor Hired", "Feed Purchased", and "Breeding Fees
and Veterinary Costs". Additionally, Mrs. Phillips testified
that she calculated the cost of their horse activity on a per
horse basis. Accordingly, petitioners knew the amount of income
that would be required in future years. Finally, Mrs. Phillips
testified that she attended seminars on management and marketing
at Arabian horse conventions. Accordingly, we conclude that
petitioners carried on their horse activity in a businesslike
manner.
As to whether petitioners maintained complete and accurate
books and records, respondent contends that petitioners'
financial records are "nothing more than gross chronological
lists of expenditures which do not permit a detailed analysis of
the various parts of the activity". Additionally, respondent
argues that the records contain many expenditures that are not
farm related, e.g., AARP dues, lottery tickets, and air
conditioning for the residence. As to petitioners' records on
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