- 19 - because the years in issue were the early stages of the horse activity, which was very different from their other businesses. Petitioners kept their expenses as low as possible. Petitioner built most of the barn, stable, and exercise arena himself. He significantly reduced some of his costs, such as stud fees and the daily cost of feed per horse. Also, petitioners sometimes negotiated reducing the purchase prices of horses by offering a foal for a reduction in the cash price. Respondent points out that the "show files" that petitioners kept for each horse were not contemporaneously prepared but were assembled in 1997. We infer nothing from this because the preparation of the show files was based on information that petitioners had contemporaneously. This factor favors petitioners. 2. The Expertise of the Taxpayers or Their Advisers Efforts to gain experience, a willingness to follow expert advice, and preparation for an activity by extensive study of its practices may indicate that a taxpayer has a profit motive. See sec. 1.183-2(b)(2), Income Tax Regs. Respondent contends that petitioners lacked expertise in running a successful horse business, and that, although petitioner studied the history of the Arabian horse and its bloodlines, he spent little time investigating the business aspects of an Arabian horse activity. Respondent contends thatPage: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Next
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