- 26 -
Petitioners kept financial records as requested by their
accountant and had a separate checking account for their horse
and rodeo activity.
A change in operating methods can indicate that a taxpayer
has a profit motive. Ronnen v. Commissioner, 90 T.C. 74, 93
(1988); sec. 1.183-2(b)(1), Income Tax Regs. Petitioners changed
their operating methods in response to their circumstances. They
abandoned their horse and rodeo activity as soon as they were
convinced that it would be unprofitable and began to operate a
fair.5
Respondent contends that petitioners' decision to abandon
this activity before the end of the second year of operations
shows that they lacked a profit objective. We disagree. We
believe that it shows that petitioners adjusted quickly to their
situation.
Respondent points out that petitioners did not have a
written business plan before starting their horse and rodeo
activity, and contends that this shows that they lacked an intent
to make a profit. We disagree. A taxpayer's actions can
5 Respondent contends that we should not consider evidence
offered by petitioners relating to their operation of a fair on
their farm after the years at issue. We have not considered that
evidence in deciding this case.
Page: Previous 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 NextLast modified: May 25, 2011