Sheila Mae Howard - Page 3

                                        - 2 -                                         
               Respondent determined deficiencies in petitioner’s Federal             
          income taxes and accuracy-related penalties as follows:                     
                    Year      Deficiency     Sec. 6662(a)                             
                    1996      $15,457        $3,091.40                                
                    1997      9,377          1,875.40                                 
                    1998      4,100          ---                                      
               After concessions by the parties,2 the issues remaining for            
          decision are:                                                               
               (1) Whether petitioner is entitled to Schedule C, Profit or            
          Loss From Business, deductions for the taxable years at issue in            
          excess of the amounts allowed by respondent in the notice of                
          deficiency.  We hold that she is not.                                       
               (2) Whether petitioner’s horse breeding activity was an                
          activity engaged in for profit within the meaning of section                
          183(a) for the taxable years at issue.  We hold that it was not.            
               (3) Whether petitioner received unreported income during               

               2  Respondent concedes that petitioner incurred a capital              
          loss on the sale of a truck in 1998 in the amount of $1,009 as              
          claimed by her on Form 4797, Sales of Business Property.                    
               Respondent also concedes the amount realized by petitioner             
          in 1998 on the sale of a house that she built for sale.                     
          Respondent further concedes that petitioner incurred a long-term            
          capital loss in 1998 with respect to the sale of this house but             
          in an amount ($13,910) less than that claimed by petitioner on              
          her 1998 return ($38,000).  However, because of the $3,000                  
          limitation on capital losses in sec. 1211(b), we need not decide            
          the exact amount of the loss because it will have no tax effect             
          in 1998, the latest of the taxable years in issue.  See sec.                
          1212(b) regarding capital loss carryovers.                                  
               Petitioner concedes that she received unreported interest              
          income in the amounts of $941, $32, and $1 during 1996, 1997, and           
          1998, respectively, and that she is entitled to a mortgage                  
          interest deduction for 1998 in the amount of $4,909.                        

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