Dale Allan Rinehart - Page 4

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          barn, and several pastures for raising and training the horses.             
               Petitioner performed most of the work on the ranch.  In 1992           
          and 1993, petitioner spent a considerable amount of time                    
          renovating the ranch.  Daily activities on the ranch included               
          weed control of the pasture, hauling hay, repairs of the stalls             
          or fences, and other general maintenance work.  In addition to              
          the daily chores, petitioner spent time breaking and training               
          young horses on the ranch.  During the breeding season,                     
          petitioner's main activity was encouraging "live cover" of the              
          horses by leading the stallion to the mare.  When petitioner was            
          away on flights for American Airlines, a laborer would come in to           
          feed the horses and clean the stalls.                                       
               Petitioner sold one horse in 1992 and none in 1993.                    
          Petitioner showed his horses in cutting horse competitions;                 
          however, he never received any monetary awards from these                   
          competitions.                                                               
               Petitioner maintained inadequate records of the horse                  
          breeding activity.  Petitioner did not record information about             
          the purchases or sales of his horses.  Petitioner did not make              
          written forecasts or projections of future income.  Additionally,           
          petitioner has never kept a separate checking account or other              
          bank account for the horse breeding activity.  Prior to 1995,               
          petitioner did not advertise the horse breeding activity.                   
               The horse breeding activity never showed a profit.                     
          Petitioner reported gross sales from this activity in the amounts           



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