Louis A. Filios and Estate of Emma L. Filios, Deceased, Louis A. Filios, Executor - Page 10

                                        - 10 -                                         
               7.   Petitioner's Breeding and Herd Management Program                  
               Petitioner increased the size of his herd from 1955 to 1975.            
          His herd grew to a high of 84 horses in 1990.                                
               In the mid-1970's, petitioner began to send his mares to be             
          bred to Kentucky stallions which had excellent pedigrees but                 
          unproven racing records.  Petitioner continued to believe                    
          vitamins and minerals were important.                                        
               In 1986, petitioner bought a broodmare, Luna Rutera, for                
          $70,000.  Luna Rutera suffered a tear in her cervix which                    
          prevented her from giving birth.  Petitioner gave Luna Rutera                
          away in 1994.                                                                
               In 1990 or 1993, petitioner began to use stallions with                 
          proven pedigrees and race performance, such as Dr. Carter, Summer            
          Squall, Cryptoclearance, and Carson City.                                    
               8.   Prior Examinations                                                 
               Respondent audited petitioners' 1977 Federal income tax                 
          return in 1980 and 1984 return in 1987.  Respondent made no                  
          adjustments to those returns.  Kida represented petitioner in                
          those audits.  Petitioner repeatedly told Kida that his horse                
          activity was a business and that petitioner intended to make a               
          profit.  Kida believed that petitioner's horse racing and                    
          breeding activity was a business.                                            
          F.   Petitioners' Income Tax Returns                                         
               Petitioners reported the horse racing and breeding activity             
          on their joint Federal income tax returns each year from 1957                
          through the years in issue.  The following chart shows the                   

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011