J. Michael and Susan Reimer - Page 20




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          changes were attempted in order to improve profitability.  Sec.             
          1.183-2(b)(1), Income Tax Regs.                                             
               Petitioners maintained a record of the income and expenses             
          related to their horse breeding activity, but they did not                  
          provide evidence of a breakdown or break-even analysis of their             
          overall horse breeding activity.  Although petitioners created a            
          business plan for their horse breeding activity, it appears that            
          they did not make decisions in accordance with the business                 
          plans, projections, or analyses of the costs required to carry on           
          the activity in a profitable manner.  It seems unhelpful for                
          petitioners to create and rely on a “revised” business plan based           
          on earlier projections rather than actual expenses.  Such                   
          reliance on projections that have no semblance to reality or to             
          historical income and expense information is foolish.  Although             
          there is some indication that petitioners carried on the horse              
          breeding activity as a separate business, we do not think that              
          petitioners carried on their activity in a businesslike manner.             
               Petitioners’ NSA records were unretrievable due to a change            
          and upgrade of software.  As such, we are not able to review                
          these purported records.                                                    
               This factor favors respondent’s position.                              
               (2)  The Expertise of The Taxpayer or Their Advisers.                  
               A taxpayer’s expertise, research, and study of an activity,            
          as well as his or her consultation with experts, may be                     







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