- 5 - total income (loss), taxable income (loss), and Federal tax liability: 1990 1991 1992 1993 1994 Pension income $20,511 $22,314 $22,504 $23,584 $25,114 Self-employment income 24,937 22,450 21,092 13,317 6,819 Capital gain income none none none 38,500 none Farm income (loss) (46,475) (60,224) (32,203) (39,302) (50,786) Total income (loss) (919) (13,628) 11,394 41,808 (18,489) Taxable income (loss) (11,769) (23,088) (605) 29,508 (32,739) Federal tax liabilitynone none none 4,429 none OPINION I. Profit Motive This is another case of taxpayers claiming that they may deduct losses from a horse activity because they allegedly entered into the activity for profit. Section 183(a) generally limits the amount of expenses that may be deducted with respect to an activity "not engaged in for profit". Whether an individual conducts an activity for profit rests on whether he or she engages in the activity with the primary purpose of reaping a profit. Wolf v. Commissioner, 4 F.3d 709, 713 (9th Cir. 1993), affg. T.C. Memo. 1991-212; see also Warden v. Commissioner, T.C. Memo. 1995-176, affd. without published opinion 111 F.3d 139 (9th Cir. 1997). Whether petitioners engaged in their horse activity with the requisite profit objective must be determined from the facts and circumstances of the case. Golanty v. Commissioner, 72 T.C. 411, 426 (1979), affd. without published opinion 647 F.2d 170 (9th Cir. 1981); sec. 1.183-2(a) and (b), Income Tax Regs. Petitioners bear the burden of proof, Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933), and more weight is given toPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011