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The purpose of maintaining books and records is more
than to memorialize for tax purposes the existence of
the subject transactions; it is to facilitate a means
of periodically determining profitability and analyzing
expenses such that proper cost saving measures might be
implemented in a timely and efficient manner. * * *
Burger v. Commissioner, T.C. Memo. 1985-523, affd. 809 F.2d 355
(7th Cir. 1987); see also Golanty v. Commissioner, supra at 430;
McKeever v. Commissioner, T.C. Memo. 2000-288; Wesinger v.
Commissioner, T.C. Memo. 1999-372. Even though a sophisticated
accounting system is not necessary, “the usage of cost accounting
techniques that, at a minimum, provide the entrepreneur with the
information he requires to make informed business decisions” is
essential. Burger v. Commissioner, supra; see also Golanty v.
Commissioner, supra; McKeever v. Commissioner, supra; Wesinger v.
Commissioner, supra.
Petitioner introduced no evidence that she kept track of
expenses throughout the year. The statements categorized
expenses, but her records did not break down the expenses by
horse, by month, or by any other means. Further, the record is
devoid of any evidence that petitioner used the statements in
making decisions about the operation of her horse activity. We
find that petitioner’s annual profit and loss statements were
nothing more than records compiled at the end of each year and
used exclusively to prepare her Schedules C. Petitioner did not
use the statements to make informed business decisions.
This subfactor weighs in favor of respondent’s position.
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