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Mr. Kramer advised Rance to combine his Oregon Schedule F
activity with Zane’s New York Schedule F activity to keep them
from being classified as hobbies. Rance and Zane did not follow
Mr. Kramer’s advice on forming a joint venture. Mr. Kramer did
not know how Zane used his property. Mr. Kramer did not ask for
or see any of Zane’s underlying financial records in connection
with his Schedule F activity.
Mr. Kramer included on the returns all the expenses
petitioners listed for him. Mr. Kramer knew the dog breeding
business was expensive and that it was speculative, with a very
small percentage of success. Mr. Kramer knew that it was very
difficult to earn money in the dog breeding business. Mr. Kramer
did not question the travel expense claimed on Zane’s 1998
Schedule F because he knew that Zane traveled overseas as well as
around the country. Mr. Kramer knew that expenses incurred at
the Westminster dog show were extensive. Mr. Kramer understood
that Zane had a cattle breeding activity separate from the dairy
operation.
OPINION
Burden of Proof
Petitioners, for the first time on brief, raise the issue of
whether the burden of proof shifted to respondent under section
7491(a). Under that section the burden of proof may shift to the
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