- 15 -
services during the years in which they were continuing the
boarding activities while, at the same time, preparing the
property for sale.
Mr. Rozzano also testified that it was primarily the cost
associated with hay feed that caused their business to experience
ongoing losses. We note that for 1999 and 2000, hay and feed
expenses accounted for 34 percent and 32 percent, respectively,
of all cash expenses before depreciation. To this end,
petitioners devised a strategy to ensure that their hay supply
costs could be mitigated so as to reduce losses and accord with
their budget projections. Petitioners took steps to ensure that
the hay would remain dry and free from infestation and that their
helper would not waste it unnecessarily. Petitioners also took
steps in 1999 and 2000 to reduce other operating expenses, such
as travel, meals, and utilities. These costs did, in fact,
decrease from 1999 to 2000. Although petitioners did make
efforts to reduce their hay expenses by protecting their supply,
an increase in the number of boarders in 2000, coupled with an
increase in the wholesale price of the feed, resulted in an
increase in hay costs. While we recognize that efforts to
improve profitability can be indicative of whether petitioners
intended to realize a profit, we do not find their refusal to
raise stall rental prices or hire additional help, especially in
the light of their existing contracts, of their decision to sell
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Next
Last modified: November 10, 2007