Albert R. Matthews - Page 13

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          1991 for which his financial information was made available to              
          the Court, petitioner reported substantial losses from the horse            
          activity.  Petitioner has not introduced evidence of even a                 
          single profitable year, although he did offer uncorroborated                
          testimony that he previously sold a cattle ranch at a profit and            
          sold a portion of his current horse ranch in 2001 to a relative             
          at a profit.                                                                
               In contrast to his history of losses from his horse                    
          activity, the record shows that petitioner was a successful                 
          attorney.  For the years in question, petitioner was able to use            
          losses from his horse activity to offset income earned from the             
          practice of law.  The magnitude of petitioner’s losses from his             
          horse activity and the substantial tax benefits petitioner                  
          received by offsetting those losses against income from his law             
          practice support the view that petitioner did not engage in his             
          horse activity for profit.                                                  
               Petitioner testified that he was an expert in raising and              
          training horses.  He grew up on his father’s cattle and horse               
          farm, has a degree in animal husbandry, and has focused on                  
          training horses for the past 25 years.  Petitioner’s testimony              
          that he is an expert in raising and training horses and that he             
          had no need to consult with advisers about such matters is not              
          contradicted.  Petitioner also testified that he spent                      
          approximately one-half of his time on his horse activity.                   






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