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Respondent determined that Mr. Abbene's distributive share
of Blue Ribbon's losses for each year in issue was zero because
Blue Ribbon's activities were activities not engaged in for
profit within the meaning of section 183.
OPINION
Petitioners claim entitlement to Mr. Abbene's share of Blue
Ribbon's losses for the taxable years in issue. Petitioners
argue that the losses are fully deductible because Blue Ribbon
engaged in the activities of horse breeding, horse showing, and
providing riding lessons with the requisite profit objective.
Petitioners contend that Mr. Abbene formed Blue Ribbon to take
advantage of the opportunity to do film and television work with
ABC and that he hoped to capitalize on Elena's fame as an Olympic
medalist and skill as an accomplished rider to make Blue Ribbon a
profitable operation. Respondent contends that the activities
were not engaged in for profit. Petitioners bear the burden of
proof.15 Rule 142(a); Welch v. Helvering, 290 U.S. 111 (1933).
Section 1366(a) generally allows shareholders of S
corporations to take into account their pro rata share of the
15 Internal Revenue Service Restructuring & Reform Act of 1998
(RRA of 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726-
727, added sec. 7491, which shifts the burden of proof to the
Secretary in certain circumstances. Sec. 7491 is applicable to
"court proceedings arising in connection with examinations
commencing after the date of the enactment of this Act." RRA of
1998, sec. 3001(c). RRA of 1998 was enacted on July 22, 1998.
Accordingly, sec. 7491 is inapplicable to the instant case.
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