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Rance’s Cutting Horse Activity
Schedules F were attached to Rance’s 1998 through 2005
income tax returns with his activity described as “crop
livestock”. At trial the evidence offered was Rance’s testimony
about his activity, but no documentary evidence (i.e., records)
was offered in support of the income and deduction entries on the
Schedules F. Rance explained that his profit motivation was
based on his goal that one of his horses could turn out to be a
“Triple Crown winner” who could earn him income in excess of the
losses claimed from the activity.
Rance’s testimony about his cutting horse activity was, in
great part, lacking in specifics.5 He discussed horse bloodlines
but failed to indicate much about his horses, such as the year
and cost of purchase, the training regimen, the events entered,
purses and competitions won, breeding efforts, profit analyses,
business plans, necessity of expenses, sale price, and so forth.
Accordingly, we are left with the task of analyzing Rance’s
cutting horse activity using his testimony and the Schedules F
attached to his income tax returns.
Rance and LaRhea had purchased 70 acres of land in southern
Oregon in 1996 and moved to the property late in 1999 after
5 For example, Rance testified about a $17,000 breeding fee
and a mare he sold for $35,000. The tax returns in the record
(1998 through 2005) do not appear to reflect these events or
activity. In addition, Rance testified that he had as many as 20
horses. The Schedules F, likewise, do not reflect that level of
activity.
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Last modified: March 27, 2008