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petitioners performed a detailed analysis of each part of their
horse activity.
Additionally, we disagree with respondent that petitioners'
records contain "many expenditures" that are not farm related.
All expenses that were not categorized under a heading such as
"Labor Hired" or "Feed Purchased" were placed by petitioners
under "Other Expenses". The expenses cited by respondent as not
being related to the farm were all categorized as "Other
Expenses". We are persuaded by Mrs. Phillips' testimony that
petitioners' procedure was to include in their farm books
expenses which might be deductible, leaving the determination of
deductibility to their accountant. Although some expenses listed
in the farm books were ultimately determined not to be farm
related, petitioners nevertheless categorized all of their
expenses and periodically calculated the category totals. As to
their records on their horses, petitioners maintained records
indicating the horses' pedigree and physical condition,
registered many of their Arabian horses with the International
Arabian Horse Association, and kept an action plan for each
breeding mare, projecting when she was to come in season and to
be bred and to which stallion she was to be bred. Based on our
review of the record, we conclude that petitioners maintained
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