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taxable income from his law practice was $214,736, $164,008, and
$161,332, respectively.1
In addition to practicing law, petitioner also is engaged in
rodeo and horse-training activities (horse activity) that are the
subject of this case. Petitioner raises and trains horses on his
ranch in Muskogee, Oklahoma, where he also resides. For the
years 1991 and 1993 through 1999 (data is not available for
1992), petitioner reported income and expenses and claimed losses
from his horse activity as follows:
Rodeo & Horse Rodeo & Horse Rodeo & Horse
Year Gross Income Expenses Losses
1991 $17,763 $92,116 ($74,353)
1992 Data not available
1993 6,264 66,211 (59,947)
1994 3,130 58,983 (55,853)
1995 15,195 53,622 (38,427)
1996 4,625 45,736 (41,111)
1997 1,016 60,837 (59,821)
1998 8,212 52,477 (44,265)
1999 4,616 47,377 (42,761)
Total 60,821 477,359 (416,538)
As shown above by the table, petitioner claimed horse
activity losses of $59,821, $44,265, and $42,761 on Schedule C,
1 The parties stipulated that these amounts were earned
from practicing law. However, a review of Schedules E,
Supplemental Income and Loss, for the years in issue shows that,
while most of petitioner’s income consisted of partnership
distributions from the Bonds Matthews Law Firm, petitioner also
received Schedule E income in the form of royalties from TEPPCO
Crude Oil, LLC, and GM Oil Prop, Inc., partnership income or loss
from the Matthews, Bonds Jr., & Hayes Building Partnership, and
income or loss from an S corporation called Hopes & Dreams Ltd.
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