Gilbert Hahn, Jr. and Margot H. Hahn - Page 15

                                       - 15 -                                         
          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.                    

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

Last modified: November 10, 2007