- 15 - that their records were used to devise methods of modifying their operations to improve profitability. Mrs. Sullivan testified merely that she reviewed the records to economize generally and to insure that she was receiving the "best buys" on supplies. Mr. Sullivan conceded that he reviewed the records only "when I make out the income taxes". Since the records were not employed to improve operations or stem the recurring, significant losses from petitioners' horse-related activities, we discount them. Golanty v. Commissioner, supra; Bessenyey v. Commissioner, supra at 274. A change of operating methods or abandonment of unprofitable methods in a manner consistent with an intent to improve profitability may indicate a profit motive. Sec. 1.183-2(b)(1), Income Tax Regs. Petitioners contend that their decisions to cease insuring their horses and to purchase only used trucks after 1982 constitute changes in operating methods designed to improve profitability.5 The evidence provided by petitioners is too sketchy to be persuasive of their claim. Although Mr. Sullivan provided some testimony regarding current costs for horse insurance, without more information regarding the value of petitioners' horses over the years, the significance of insurance 5 Petitioners also argue that Mrs. Sullivan performed all of the unskilled manual labor attendant to keeping horses (such as cleaning stables) and paid only for veterinarians, trainers, and farriers. However, there is no evidence that this practice represents any change in their mode of operation from the outset.Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Next
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