Gilbert Hahn, Jr. and Margot H. Hahn - Page 14

                                       - 14 -                                         
          and necessary business expenses of his horse breeding and                   
          training activity.  Accordingly, he argues, any amounts                     
          attributable to the related items do not constitute income.                 
               Section 108(e)(2) provides:  “No income shall be realized              
          from the discharge of indebtedness to the extent that payment of            
          the liability would have given rise to a deduction.”  In general,           
          a taxpayer may deduct ordinary and necessary expenses paid or               
          incurred in carrying on any trade or business.  Sec. 162(a); see            
          also Commissioner v. Lincoln Sav. & Loan Association, 403 U.S.              
          345, 352 (1971); FMR Corp. & Subs. v. Commissioner, 110 T.C. 402,           
          414 (1998).                                                                 
               Petitioner asserts that he was in the trade or business of             
          breeding and training horses from 1983 until sometime in 1995.              
          Petitioner contends that he used most of the funds he borrowed              
          from the bank to finance the horse breeding activity.                       
          Petitioner provided his own affidavit and the affidavit of his              
          accountant, Elliot Blum, to support his contention.  Accordingly,           
          petitioner argues that the payment of the related items would               
          have given rise to a deduction under section 162(a) as ordinary             
          and necessary business expenses.                                            
               Respondent contends that petitioner has not established that           
          he used the borrowed funds for the horse breeding activity.                 
          Respondent provided letters that petitioner wrote to the bank in            
          1988 and 1989 indicating that petitioner borrowed against his               

Page:  Previous  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  Next 

Last modified: November 10, 2007