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Petitioner did not keep a separate bank account for her
horse showing and breeding activities, but she testified that she
maintained a spreadsheet with information on each horse and its
expenses.6 She did not do any bookkeeping for the activities
because she felt that, with relatively few horses, she would be
able to track her expenses accurately. No income was reported
from the horse showing and breeding activities through the
taxable year 2001.7
Petitioner did not advertise her horses for sale in trade
magazines or journals at any point in her operations. Petitioner
ceased her horse activities in November 2005.
At the time the notice of deficiency was issued, petitioner
had not yet filed a Federal income tax return for 2001. Based on
a substitute for return prepared pursuant to section 6020(b),
respondent determined a $14,490 deficiency in tax, along with
additions to tax totaling $4,061.52, for 2001.
Petitioner filed her petition with the Court on April 1,
2005. On April 6, 2005, petitioner and her husband jointly filed
a Form 1040, U.S. Individual Income Tax Return, for the 2001
taxable year with the Internal Revenue Service.
6 The spreadsheet was not introduced as an exhibit.
7 Petitioner has yet to file returns for subsequent years,
but she testified to the fact that the activities were never
profitable.
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