Elizabeth Giles - Page 21

                                       - 21 -                                         
               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.               





Page:  Previous  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  30  Next

Last modified: May 25, 2011