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Beginning in 1998 and extending through 2003, Zane filed one
Schedule F each year designating the activity as “Cattle Crops--
Dog Breeding.” In 2004, he simply included the dog breeding
activity expenses in a Schedule F labeled “Cattle Crops--Dog
Breeding”, and a separate Schedule F was attached and designated
“Organic Dairy Farm”.
Zane’s lack of records and failure to address and/or be
particularly concerned about the financial aspects and the
potential for recouping losses show that he did not operate the
activity in a businesslike manner. Someone with the intent to
make a profit from dogs would be expected to have a substantial
file on each dog. See, e.g., Rinehart v. Commissioner, T.C.
Memo. 2002-9. The lack of detailed records as to which dogs were
profitable and which were not is an indication that the dog
breeding activity was not carried on for profit. See Smith v.
Commissioner, T.C. Memo. 1997-503.
Zane made no effort to reduce costs and control losses.
Although he contends that his coownership arrangements helped to
reduce expenses, any such reduction was insufficient to stem the
increasing overall amount of expenses and the increasing losses.
He did not earn any income from judging during the years at issue
and has earned relatively nominal amounts from showing dogs.
Zane’s income tax returns reflect no income from the dog breeding
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Last modified: March 27, 2008