- 22 -
believe that petitioners' attendance at horse conventions was
helpful to their horse activity.
As to the barn and tack shop, we are persuaded by Mrs.
Phillips' testimony that the barn was not built because she was
involved in an automobile accident. At trial, petitioners
testified that they still planned on building the barn. In fact,
petitioners later built smaller barns in order to save on
boarding costs. Accordingly, we conclude that both petitioners'
planned, unconstructed barn and the smaller, constructed barns
constitute adaptations in their operating methods, and that such
adaptations, along with the other actions taken by petitioners,
discussed supra, are consistent with an intent to improve the
profitability of their horse activity.
Section 1.183-2(b)(2), Income Tax Regs., provides:
Preparation for the activity by extensive study of its
accepted business, economic, and scientific practices,
or consultation with those who are expert therein, may
indicate that the taxpayer has a profit motive where
the taxpayer carries on the activity in accordance with
such practices. * * *
Respondent argues that petitioners did not establish that they
"focused their efforts on the business or economic aspects of the
activity." Respondent contends that the fact that the
information recorded by petitioners "did not lend itself to
analyses along cost or profitability lines is strong evidence
Page: Previous 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 NextLast modified: May 25, 2011