Martin and Marion Abbene - Page 13

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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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