- 36 -
revenue she could expect, or what risks might impair the
production of these revenues. She also has not established that
she undertook a basic investigation of the factors that affected
the profitability of a horse breeding and showing activity. See
Vallette v. Commissioner, T.C. Memo. 1996-285; Underwood v.
Commissioner, T.C. Memo. 1989-625; see also McKeever v.
Commissioner, T.C. Memo. 2000-288 (taxpayer’s background as a
lifelong horsewoman did not provide sufficient expertise as to
the economic aspects of a horse pursuit to indicate a profit
objective). As in Daley v. Commissioner, T.C. Memo. 1996-259,
petitioner apparently started her horse activity with little
concept of the expenses involved or of the steps required to
achieve cost efficiency and an eventual profit and has continued
to operate the activity in the same manner. See also Rinehart v.
Commissioner, T.C. Memo. 1998-205. While a taxpayer need not
prepare for an activity by making a formal market study, he or
she should at least undertake a basic investigation of the
factors that would affect profit. Underwood v. Commissioner,
supra; Burger v. Commissioner, T.C. Memo. 1985-523.
This factor favors respondent.
3. Time and Effort Spent Conducting the Activity
The fact that a taxpayer devotes much of his or her personal
time and effort to an activity may indicate a profit objective,
especially where the activity does not involve substantial
Page: Previous 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 NextLast modified: May 25, 2011