- 44 -
change its character. * * * [Godfrey v. Commissioner,
335 F.2d at 85.22]
In Stevens v. Commissioner, 46 T.C. 492 (1966), the taxpayer
and another individual (Woody) entered into various joint
ventures each of which involved acquiring a race horse and
sharing that horse’s winnings or any proceeds from its sale.
Woody paid the purchase price of each horse, and the taxpayer
paid each horse’s maintenance and training expenses. We held
that one-half of the otherwise deductible maintenance expenses
were capital expenditures because they represented the taxpayer’s
cost of acquiring a one-half interest in the horses. We stated:
We agree with respondent to the extent that at
least some portion of these expenses, which would
otherwise be deductible as ordinary and necessary
business expenses, must be capitalized as petitioner’s
acquisition costs in the particular factual
circumstances here present. It is obvious that
petitioner had some acquisition cost for his interests;
these interests were not acquired for nothing.
Although Woody paid the entire purchase price for each
horse, he did not give petitioner a one-half interest
in each without consideration. * * *
* * * * * * *
In effect, Woody assumed petitioner’s half of the
purchase price and as consideration for this,
petitioner assumed Woody’s half of the expense burden.
* * * [Id. at 497.]
22 The court held that our findings as to the remaining
expenses were not clearly erroneous. See Godfrey v.
Commissioner, 335 F.2d 82, 86 (6th Cir. 1964), affg. T.C. Memo.
1963-1.
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