Elizabeth Giles - Page 31

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          property.  Moreover, of the 5 horses that petitioner maintained             
          during the subject years, one (Bogaz) was a gelding that she                
          maintained for 10 years before selling it and another (Silent               
          Reign) was a horse that she kept at the Falling Water Way                   
          property for more than 5 years after selling it.                            
               C.  Changing Methods To Improve Profitability                          
               A change of operating methods, adoption of new techniques,             
          or abandonment of unprofitable methods may also indicate a profit           
          objective.  Sec. 1.183-2(b)(1), Income Tax Regs.                            
               Petitioner alleges that she changed her method of operation            
          for the better when she stopped breeding horses from 1992 through           
          1996 on account of a depressed market and started breeding them             
          again in 1997 when she sensed that the market had improved.  We             
          find no credible evidence to support petitioner’s claim that the            
          market for Arabian horses was depressed from 1992 through 1996 or           
          that it changed favorably for her in 1997.  In addition, while              
          petitioner testified that she was making her horses well known              
          from 1992 through 1996 by showing them, she sold for                        
          consideration only one of her horses after that period and that             
          was not until 5 years after the period ended.                               
               Petitioner also alleges that she attempted to improve the              
          horse activity’s profitability by causing a reduction in the                
          operating expenses of the horse activity for the 4-year period              
          from 1997 through 2000, when compared to the 4-year period from             






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