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In 1975, petitioner purchased a principal residence (the
Livermore residence) and approximately 5 acres of land in
Livermore, California (the Livermore property) for $52,000. The
Livermore residence was approximately 1,000 square feet in size,
and there were several small farm structures on the property.
Between 1975 and 1988, petitioner made $25,000 in capital
improvements to the Livermore residence, and $25,000 in capital
improvements to the farm structures. Petitioner's total adjusted
basis in the Livermore residence, farm structures, and 5 acres of
land was $102,000.
While living on the Livermore property, petitioner operated
a mobile farrier (horse-shoer) business out his 1984 Dodge pickup
truck, which was equipped with a horse-shoeing camper. Although
petitioner parked his truck on the property he did not operate
the farrier business on the Livermore premises. In 1988,
petitioner received gross receipts from his farrier business of
$37,088,3 and paid deductible business expenses of $49,542.
Petitioner also operated a horse boarding and breeding
business on pasture land that he leased from neighbors. At any
given time, petitioner boarded approximately 30 horses for
clients on the leased premises. In addition, petitioner kept one
stallion, approximately 6 brood mares, and 6 colts on the leased
premises, which he owned and used in his horse breeding business.
Petitioner did not use these horses for personal purposes.
3 Petitioner's gross receipts from this activity are referred
to in the notice of deficiency as "Schedule C gross receipts."
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