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Petitioner had no records of bills or invoices for any
expenses he incurred on behalf of M&S. Petitioner provided a
list of expenses that was prepared using the Quicken software
program. The expense report was prepared and printed solely for
trial.
Petitioner did not maintain records for the purpose of
decreasing expenses or increasing profits. Almost all of
petitioner’s evidence regarding his record keeping was printed
from his computer in preparation for trial. Petitioner provided
no credible evidence of conducting a business of horse breeding,
and there is no reliable evidence that he was breeding any horses
after selling Bandits Lucky Doc.
A taxpayer’s history of income or loss with respect to an
activity may indicate the presence or absence of a profit
objective. See Golanty v. Commissioner, 72 T.C. at 426; Kuberski
v. Commissioner, T.C. Memo. 2002-200; sec. 1.183-2(b)(6), Income
Tax Regs. The magnitude of the activity’s losses in comparison
with its revenues may be an indication that the taxpayer did not
have a profit objective. McKeever v. Commissioner, T.C. Memo.
2000-288. A continuous series of losses during the startup stage
will not necessarily be deemed indicative that the activity was
not engaged in for profit. Sec. 1.183-2(b)(6), Income Tax Regs.
The cumulative loss, however, should not be of such a magnitude
that an overall profit on the entire operation could not possibly
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Last modified: May 25, 2011