Gilbert Hahn, Jr. and Margot H. Hahn - Page 15
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line of credit to finance real estate purchases and to pay income
taxes, insurance premiums, and other bills. In a letter dated
May 25, 1989, for example, petitioner requested that the bank
place $770,000 into his checking account, stating that “The
purpose of this loan is the payment of income taxes.”
Respondent further contends that, even if the borrowed funds
were used in the horse breeding activity, petitioner has not
established that the activity was a trade or business.
Respondent served petitioner with a request for production of
documents pursuant to Rule 72(a)(1) asking petitioner to “provide
all documents establishing that the training/breeding of horses
was an activity undertaken for profit.” Respondent asserts that
petitioner has not provided the requested information.
Petitioner counters that he conducted the horse breeding
activity in a businesslike manner, including keeping accurate
books and records and using professional advisers to assist him.
Although petitioner acknowledges that the activity generated
“considerable” losses in prior years, he contends that respondent
never disallowed the losses.
Viewing the facts most favorably to respondent, we conclude
there remains a genuine issue as to whether petitioner used the
borrowed funds in a trade or business. The affidavits of
petitioner and his accountant each assert that “most” of the
borrowed funds were used in the horse breeding activity.
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Last modified: November 10, 2007