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prove that the Schedule F activity was within the anticipated
startup phase of an activity conducted for profit. As stated, we
think that the Schedule F activity was in the nature of a hobby.
4. Manner In Which Taxpayer Carries on Activity
“The fact that the taxpayer carries on the activity in a
businesslike manner and maintains complete and accurate books and
records may indicate that the activity is engaged in for profit.”
Sec. 1.183-2(b)(1), Income Tax Regs.
Petitioner did not keep formal or accurate books and records
for the Schedule F activity. Petitioner’s only records consisted
of canceled checks, invoices for goods and services received, and
bills. While a taxpayer need not maintain a sophisticated cost
accounting system, the taxpayer should keep records that enable
the taxpayer to make informed business decisions. See Burger v.
Commissioner, 809 F.2d 355, 359 (7th Cir. 1987), affg. T.C. Memo.
1985-523. Petitioner’s failure to maintain books of account,
reconcile his bank statement every month (or even open the
envelopes containing the statement and canceled checks), or use
checks only from the account dedicated to the Schedule F activity
evidences a lack of concern for cash-flow. Also, petitioner did
not keep records respecting the costs associated with individual
horses. See Dodge v. Commissioner, T.C. Memo. 1998-89 (without
records according to individual horses, taxpayers had no way of
knowing which horses were more profitable or which training
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