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constructing a house and other buildings. Beginning in 1998,
Rance and LaRhea claimed farm losses pertaining to the Oregon
property for an activity described as “crop livestock”. The
primary expenses claimed for 1998 were depreciation, repairs, and
plans; there was no income for that year. The specifics of the
claimed expenses for 1998 have not been detailed or adequately
explained.
In 1999, Rance purchased P.K., a driving horse; Popcorn, a
Royal Dartmoor pony mare in foal; and Leo, a western pleasure
mule. He subsequently acquired Jewels, which was later traded
for Mitzi and I Gotta Lotta; none of these horses were entered in
competitions. Mitzi was sold for $6,300 and I Gotta Lotta for
$6,000. No information was offered as to how these horses fit
into Rance’s business plan, which he stated involved cutting
horses.
Dual Docs was purchased in 2001 for $30,000 and was the
first horse entered into competition. During 2001 and 2002, Dual
Docs was in training in Medford, Oregon, with Bobby and Jolene
Nelson. He was sold at a loss in 2004. This generic information
is, in essence, all the record offers regarding Dual Docs.
The following is an analysis of Rance’s cutting horse
activity using the nine factors as a guide.
1. Manner in Which the Activity Is Conducted--The fact that
a taxpayer carries on the activity in a businesslike manner and
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Last modified: March 27, 2008