J. Michael and Susan Reimer - Page 21




                                       - 20 -                                         
          indicative of a profit objective.  Sec. 1.183-2(b)(2), Income Tax           
          Regs.                                                                       
               The fact that Mrs. Reimer had experience in raising or                 
          maintaining horses prior to entering into the horse breeding                
          activity does not alone show that the horse activity was engaged            
          in with a profit objective.  See Glenn v. Commissioner, T.C. Memo           
          1995-399, affd. without published opinion 103 F.3d 129 (6th Cir.            
          1996).  At the time they started the activity, petitioners owned            
          J-Mar Elbravado, which introduced them to the business of Arabian           
          horse breeding.  Petitioners also sought general advice from                
          other breeders, trainers, and an accountant.  However, there is             
          no evidence that they reviewed the records of other breeding                
          operations or sought specific advice as to how to make their                
          operation profitable.  Similar to the taxpayers in Burger v.                
          Commissioner, T.C. Memo. 1985-523, affd. 809 F.2d 355, 359 (7th             
          Cir. 1987), petitioners could not point to any evidence that                
          demonstrated how they planned to reduce their losses. (“The                 
          taxpayers’ failure to consult economic experts or develop an                
          economic expertise themselves is another fact that indicates a              
          lack of profit motive”.)  Nor could petitioners show how they               
          monitored expenses or losses to enable them to make informed                
          business decisions as to how to make their activity profitable.             
               This factor favors respondent’s position.                              








Page:  Previous  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  30  Next

Last modified: May 25, 2011