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Veterinary Advertising Total
Year Gross Receipts Expenses Expenses ExpensesProfit/(Loss)
1988 $95 $222 $742 $27,782 ($27,687)
1989 3,508 1,304 34 32,244 (28,736)
1990 244 3,410 135 38,197 (37,973)
1991 -0- 1,803 -0- 28,136 (28,136)
1992 3,000 2,434 -0- 32,545 (29,545)
1993 3,200 899 -0- 46,622 (43,422)
1994 4,080 5,322 -0- 38,152 (34,072)
1995 2,500 2,377 -0- 40,703 (38,203)
1996 3,024 1,272 1,837 40,337 (37,313)
1997 260 1,382 25 24,475 (24,215)
1998 500 1,453 -0- 21,568 (21,068)
1999 900 2,614 -0- 23,677 (22,777)
2000 1,000 1,731 -0- 18,649 (17,649)
2001 20,000 947 -0- 19,791 209
2002 -0- 3,101 -0- 27,072 (27,072)
2003 200 1,398 -0- 23,621 (23,421)
Total 42,511 31,669 2,773 483,571 (441,080)
D. Tax Treatment of Petitioner’s Horse Activity
1. Audit of Petitioner’s 1991 and 1992 Tax Returns
In 1994, Internal Revenue Agent W. Dillard conducted a field
audit of petitioner’s 1991 and 1992 tax returns, specifically
examining petitioner’s Schedule C horse activity under the
passive activity rules of section 469. Mr. Wessman handled the
audit on behalf of petitioner. On May 9, 1995, respondent sent
petitioner a letter stating: “We examined your tax return[s]
[for 1991 and 1992] and made no changes to the tax you reported.”
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