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him.
Petitioner reported income and expenses from the Anchor Inn
on her Federal income tax returns for 1996 through 1998 on
Schedules C as follows:
Gross Total Total
Year Income Reported Expenses Claimed Losses Claimed
1996 $6,136 $37,215 $31,079
1997 6,045 27,821 21,776
1998 8,586 17,822 9,236
Petitioner reported income and expenses from the horse
breeding activity on her Federal income tax returns for 1996
through 1998 on Schedules F, Profit or Loss From Farming, as
follows:
Gross Total Total
Year Income Reported Expenses Claimed Losses Claimed
1996 $1,901 $11,037 $9,136
1997 1,576 25,109 23,533
1998 2,300 14,997 12,697
D. The Notice of Deficiency
In the notice of deficiency, respondent determined that with
respect to the Anchor Inn, petitioner had not substantiated
Schedule C expenses for 1996, 1997, and 1998, in excess of
$25,305, $25,023, and $15,490, respectively. Respondent also
determined that petitioner’s horse breeding activity was not an
activity engaged in for profit within the meaning of section 183
and disallowed all of her Schedule F deductions to the extent
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