Harvey J. Davis and Patricia A. Davis - Page 22

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               We disagree.  Petitioners’ financial statements for 1992,              
          1993, and 1995 show that petitioners believed their horses were             
          valuable and were increasing significantly in value.  Petitioner            
          credibly testified that he expected petitioners’ horses and farm            
          improvements to appreciate in value and that he expected to                 
          recover his losses by selling the appreciated assets.  Thus, we             
          give little weight to the fact that petitioners’ business plan              
          contained no projections of appreciation in the value of                    
          petitioners’ business assets.                                               
               Petitioners’ expectations were substantially corroborated by           
          appraisals they obtained from O’Connor.  Respondent did not                 
          challenge O’Connor’s appraisals for most of the horses except to            
          point out that she used a 1998 valuation date.                              
               Respondent contends that O’Connor did not consider the                 
          effect Brigitta La Brisa’s inability to breed from 1990 to 1997             
          had on her value in 1996.  We disagree.  O’Connor did consider              
          the fact that Brigitta La Brisa had difficulty breeding because             
          she appraised her with foal ($30,000) and without foal ($20,000).           
          Using the $20,000 amount in estimating the appreciation in value            
          of petitioners’ horses, petitioners still had a substantial                 
          amount of appreciation from their horses.                                   
               Respondent contends that petitioners should not have                   
          included Brilliant and Spanish Ballerina in their estimate of               
          appreciation because they were born after 1996.  We disagree.               

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