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Expertise of the Taxpayer or Her Advisers
Preparation for an activity by extensive study or
consultation with experts may indicate a profit motive where the
taxpayer conducts the activity in accordance with such study or
advice. Sec. 1.183-2(b)(2), Income Tax Regs. We find that the
record amply demonstrates that petitioner has developed an
expertise in Appaloosa pedigrees and bloodlines. She has
consulted with and followed the advice of acknowledged experts in
her industry with respect to the economics of breeding and
selling Appaloosas. She has regularly read "The Appaloosa
Journal", published by the National Appaloosa Horse Club. She
has also served as a judge at Appaloosa shows. We find that
this factor favors petitioner.
Time and Effort Expended
The fact that the taxpayer devotes much of her personal time
and effort to carrying on an activity, particularly if the
activity does not have substantial recreational aspects, may
indicate a profit motive. Sec. 1.183-2(b)(3), Income Tax Regs.
The fact that the taxpayer devotes a limited amount of time to an
activity does not necessarily indicate a lack of profit motive
where the taxpayer employs competent and qualified persons to
carry on such activity. Id. Petitioner devoted nearly all of
her personal time to her Appaloosas, including her 4 weeks of
vacation from her job as a registered nurse. During the taxable
years in issue, her billing service dwindled, leaving her more
time to devote to her Appaloosas. She selectively hired highly
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Last modified: May 25, 2011