- 24 -
assets exceeds the operating losses. Id. The appreciation in
value must be sufficient, however, to recoup the accumulated
losses of prior years. Golanty v. Commissioner, supra at 427-
428; Bessenyey v. Commissioner, 45 T.C. at 274; Dodge v.
Commissioner, supra; Taras v. Commissioner, T.C. Memo. 1997-553.
Petitioners incurred operating losses in 23 of the 26 years
in which they have been engaged in their horse-related
activities. For 16 of the loss years, the amount of the loss is
not available. For the remaining 7 loss years, which are the
most recent 7 years through 1995, accumulated losses total
$279,270. Even accepting arguendo petitioners' own estimates of
the value of their horses in 1996, such estimates are in a range
of $170,000 to $222,500. Thus the appreciated value of
petitioners' horses, by their own estimate, does not recoup the
losses of the last 7 years, let alone the accumulated losses of
the other 16 loss years. Nor do we think there is reason to
believe that future appreciation will recoup petitioners' losses.
Petitioners estimated that Colonel Rey Lew, their current prize
stallion, was worth $100,000 to $150,000 in 1996, and they
offered speculation that he had tremendous potential yet to be
realized. We are not persuaded by such speculation. The horse
has been old enough to compete since 1989 and has achieved
significant success in both professional and nonprofessional
competition since that time. As distinguished from the situation
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