James M. Goforth and Brenda Goforth - Page 6




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                            Ranch                                                      
          Gross                       Net           Petitioners’                       
          Year      Income*     Expenses     Income (Loss)    Nonranch Income          
          1983    $  84,463    $  308,325    ($  223,862)      $  533,198              
          1984      273,261       277,859         (4,598)          51,615              
          1985       42,110       288,626       (246,516)         171,230              
          1986       99,486       359,717       (260,231)         452,981              
          1987       74,300       241,417       (167,117)         265,788              
          1988       61,827       189,266       (127,439)         394,278              
          1989       24,926       213,277       (188,351)         515,927              
          1990       37,835       182,132       (144,297)         543,930              
          1991       78,268       170,663        (92,395)         593,948              
          1992       44,038       144,645       (100,607)         556,674              
          1993       73,102       151,937        (78,835)         472,653              
          1994       33,490       147,758       (114,268)         485,229              
          1995      106,388        95,934         10,454          514,322              
          1996       22,572        55,392        (32,820)         372,676              
          Total   $1,056,066   $2,826,948    ($1,770,882)      $5,924,449              
               * Each year for 1986 through 1996, petitioners                          
                    received $22,044 from the U.S. Department of                       
                    Agriculture for the 550 acres of ranch land that                   
                    was under the Government conservation program.                     
                    This $22,044 is included in annual ranch gross                     
                    income.                                                            

               As reported, petitioners’ net ranch losses offset petitioners’          
          nonranch income consisting primarily of petitioner’s income from his         
          medical practice.  As a result, petitioners greatly reduced                  
          their reported Federal income tax liability for 1983 through 1994.           
               On audit for 1993 and 1994, respondent determined that the              
          ranch was not operated for profit, and respondent disallowed under           
          section 183 petitioners’ claimed ranch losses in excess of income            
          derived from the ranch.                                                      












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