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1. Manner in Which Petitioner Carried On the Horse
Activity
To determine whether a taxpayer carried on an activity in a
businesslike manner, three subfactors may be considered. Sec.
1.183-2(b)(1), Income Tax Regs.
a. Complete and Accurate Books and Records
The fact that the taxpayer carries on the activity in a
businesslike manner and maintains complete and accurate books and
records may indicate that the activity is engaged in for profit.
Elliott v. Commissioner, 90 T.C. 960, 972 (1988), affd. without
published opinion 899 F.2d 18 (9th Cir. 1990); Engdahl v.
Commissioner, 72 T.C. 659, 666 (1979); sec. 1.183-2(b)(1), Income
Tax Regs.
Petitioner asserts that she kept complete and accurate books
and records and argues that respondent’s concession that she
substantiated her Schedule C expenses so indicates. Annual
profit and loss statements were introduced into evidence for the
years 1988 through 2003, including the years in issue. These
statements were prepared by Ms. Pope and used by Mr. Wessman to
prepare petitioner’s Schedules C.
Although petitioner’s annual profit and loss statements were
sufficient to substantiate her Schedule C expenses, these
statements are not indicative that the horse activity was carried
on for profit for the purposes of section 1.183-2(b)(1), Income
Tax Regs. This Court has stated:
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