Louis A. Filios and Estate of Emma L. Filios, Deceased, Louis A. Filios, Executor - Page 13




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          Commissioner, 722 F.2d 695, 704 (11th Cir. 1984), affg. 78 T.C.              
          471 (1982); sec. 1.183-2(b), Income Tax Regs.  Petitioners have              
          the burden of proof on this issue.  Golanty v. Commissioner, 72              
          T.C. 411, 426 (1979), affd. without published opinion 647 F.2d               
          170 (9th Cir. 1981).                                                         
          B.   Application of the Factors                                              
               1.   Manner in Which the Taxpayer Conducts the Activity                 
               Maintaining complete and accurate books and records,                    
          conducting the activity in a manner substantially similar to                 
          comparable businesses which are profitable, and making changes in            
          operations to adopt new techniques or abandon unprofitable                   
          methods are factors which may indicate that a taxpayer conducted             
          the activity for profit.  Engdahl v. Commissioner, 72 T.C. 659,              
          666-667 (1979); sec. 1.183-2(b)(1), Income Tax Regs.                         
               Harry L. Landry (Landry), petitioners' expert, testified                
          that petitioner's recordkeeping was better than what he usually              
          saw for horse activities.  Petitioners contend that petitioner               
          operated his horse racing and breeding activity in a businesslike            
          manner because he had a separate bank account and kept detailed              
          financial and breeding records for the activity.  We disagree.               
          Petitioner did not have budgets, income statements, balance                  
          sheets, income projections, or financial statements for the                  
          activity other than those compiled annually by petitioners'                  
          accountant to prepare their annual Federal tax returns.                      
               Petitioners contend that petitioner tried four different                
          approaches to succeeding at his horse racing and breeding                    


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