- 18 -
activity. See Phillips v. Commissioner, T.C. Memo. 1997-128
(holding that a business plan need not be in written form and can
be evidenced by the taxpayer’s actions). When he began the horse
breeding activity, Mr. Rinehart moved from the Van Alstyne ranch,
which was set up for raising cattle, to the Campbell ranch, which
was set up for horse breeding and training. Mr. Rinehart kept a
library of books on the Campbell ranch to have at his disposal.
He advertised and publicized the horse breeding activity.
Changing operating methods or adoption of new techniques in
a manner consistent with an intent to improve profitability may
also indicate a profit motive. Sec. 1.183-2(b)(1), Income Tax
Regs. During the years in issue, Mr. Rinehart changed his
breeding program from live cover to artificial insemination.
This made it possible for his stallions to breed with more mares
and for him to maximize the opportunity to fertilize his mares.
This provided Mr. Rinehart with additional horses to sell and/or
breed.
We conclude that this factor indicates that petitioners had
the requisite profit motive.
Expertise of Mr. Rinehart and His Advisers
A taxpayer’s expertise, research, and study of an activity,
as well as his consultation with experts, may be indicative of a
profit intent. Sec. 1.183-2(b)(2), Income Tax Regs. Respondent
concedes that Mr. Rinehart has extensive expertise in horse
breeding. Mr. Rinehart consulted with experts on various aspects
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011