- 18 -
broodmares. They tried to keep costs as low as possible. 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 did not seek or have
the economic expertise necessary to operate the horse activity
profitably. Respondent points out that petitioners did not show
a profit from 1993 to 1996, and that none of the material that
petitioners reviewed or experts with whom they talked addressed
how to make a profit or minimize losses. Petitioner knew a lot
about breeding, raising, training, boarding, buying, and selling
of horses and the costs associated with those actions. Mr.
Strickland had extensive business experience. Petitioners read
books and periodicals, viewed videotapes, attended seminars, and
consulted with experts. We believe that petitioners had the
expertise to conduct a profitable horse activity. This factor
favors petitioners.
3. Taxpayer's Time and Effort
The fact that a taxpayer devotes much time and effort to
conducting an activity may indicate that he or she has a profit
objective. See sec. 1.183-2(b)(3), Income Tax Regs.
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011