- 27 -
merely stipulated that losses were reported in those years.9 The
3 income years were 1972, 1981, and 1982, in which net income was
$985, $7,336, and $11,742, respectively. For the post-1988 loss
years (1989-95), the yearly loss amounts ranged from
approximately $32,000 to approximately $51,000, with an average
annual loss of approximately $40,000 during these years.
To the extent petitioners seek to account for this
extraordinary record of losses, they emphasize a series of
unforeseen mishaps in the 1980's as well as what they effectively
contend is a lengthy "startup" period in realizing a cutting
horse's full value. Given the significance of these losses, we
will carefully evaluate petitioners' explanations.
From 1969 through 1980, petitioners experienced 11 years of
losses and 1 year (1972) in which they realized a gain of $985.
Although petitioners' testimony and argument sought primarily to
account for their losses since 1982, they did experience some
unforeseen adverse events in the 1970's.10 In any event, this
9 Petitioners produced return information for income, but
not loss, years prior to 1989. Given their production of return
information for income years going back to 1972, we believe
return information for loss years prior to 1989 was also
available to petitioners. They have in any event offered no
explanation for its absence. Given their failure to produce
return information for loss years prior to 1989, we presume such
evidence would be unfavorable to petitioners if produced.
Wichita Terminal Elevator Co. v. Commissioner, 6 T.C. 1158, 1165
(1946), affd. 162 F.2d 513 (10th Cir. 1947).
10 Petitioners testified that a promising stallion they
(continued...)
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