Louis J. Novak - Page 9




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          Crossings”.  Petitioner used separate letterhead and business               
          cards for the horse activity that bore the name “Arabian                    
          Crossings”.  Mr. Dahart’s name appears on both the letterhead and           
          business cards along with petitioner’s name.  Mr. Dahart did not            
          own any interest in petitioner’s horses.                                    
               Petitioner has not prepared a written business plan for his            
          horse activity, nor has he prepared a written analysis to                   
          determine how he could make a profit or what he would have to do            
          to break even.  Petitioner has not consulted with persons with              
          expertise regarding the financial aspects of his horse activity.            

                                       OPINION                                        
               The sole issue for decision is whether petitioner’s                    
          breeding, training, and showing of Arabian horses activity is an            
          activity not engaged in for profit.  Section 183(a) provides that           
          if a taxpayer’s activity constitutes an activity not engaged in             
          for profit, expenses arising out of the activity are allowed as             
          deductions only as provided in section 183(b).  An “activity not            
          engaged in for profit” is defined in section 183(c) as “any                 
          activity other than one with respect to which deductions are                
          allowable for the taxable year under section 162 or under                   
          paragraph (1) or (2) of section 212.”  Section 162 generally                
          permits the deduction of expenses incurred in a trade or                    
          business, and paragraphs (1) and (2) of section 212 generally               
          permit a similar deduction for expenses incurred “for the                   





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