Donald Keith Morley and Rebecca B. Morley - Page 2

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               1990           13,370              3,342                               
               1991           10,963                   ---                            
               All section references are to the Internal Revenue Code in             
          effect for the years in issue, and all Rule references are to the           
          Tax Court Rules of Practice and Procedure.  The issues for                  
          decision are:  (1) Whether a horse-breeding activity was an                 
          activity not engaged in for profit; and (2) whether petitioners             
          are liable for additions to tax pursuant to section 6651(a)(1)              
          for 1988, 1989, and 1990.                                                   
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
          The stipulation of facts, the second supplemental stipulation of            
          facts, and the attached exhibits are incorporated herein by this            
          reference.  Petitioners Donald Keith Morley (Mr. Morley) and                
          Rebecca B. Morley, husband and wife, resided in Elizabethton,               
          Tennessee, at the time they filed their petition.  During the               
          years in issue,1 petitioners had three children.  Petitioners               
          filed their 1988, 1989, and 1990 Federal income tax returns in              
          April 1990, August 1991, and April 1992, respectively.                      
               Mr. Morley operated a dental practice that was the sole                
          source of income for his family.  His dental practice income                
          averaged $128,866.                                                          




               1  Unless otherwise indicated, all descriptions refer to the           
          1985, 1986, 1987, 1988, 1989, 1990, and 1991 tax years.                     



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