- 14 -
breeding fees of as much as $5,000, and that the work required of
Mrs. Sullivan in pursuit of that goal was far too onerous to
constitute recreation. Respondent contends that petitioners'
long history of losses demonstrates that their horse-related
activities were not profit-oriented, but instead served Mrs.
Sullivan's personal and recreational interests, given her
longstanding passion for horses. We shall evaluate the evidence
of profit motive with reference to the factors enumerated in the
regulations and any other relevant indicia.
Manner in Which Activity Conducted
The fact that a taxpayer carries on the activity in a
businesslike manner and maintains complete and accurate books and
records may indicate that the activity was engaged in for profit.
Sec. 1.183-2(b)(1), Income Tax Regs. Petitioners point to the
detailed records that Mrs. Sullivan maintained as evidence of the
businesslike conduct of their horse-related activities. However,
if there is a lack of evidence that the taxpayer's records were
utilized to improve the performance of a losing operation, such
records generally do not indicate a profit motive. Golanty v.
Commissioner, supra at 430; Osteen v. Commissioner, T.C. Memo.
1993-519, affd. in part and revd. in part 62 F.3d 356 (11th Cir.
1995); see also Burger v. Commissioner, 809 F.2d 355, 359 (7th
Cir. 1987), affg. T.C. Memo. 1985-523. Despite more than 2
decades of losses, petitioners presented no convincing evidence
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011