- 85 -
available to Rance and LaRhea in this instance. Accordingly, we
hold that Rance and LaRhea were negligent, within the meaning of
section 6662, for failure to keep proper books and records and
generally for claiming losses from the cutting horse activity.
Whether Zane and Shannon Are Liable for a Section 6662 Penalty
With Respect to Their Disallowed Schedule F Losses Claimed With
Respect to Their Dog breeding activity and Pre-2001 Cow Activity
Zane and Shannon claimed Schedule F losses in connection
with a dog breeding and showing activity for their 1998, 1999,
2000, and 2001 tax years.11 Zane claimed substantial losses from
his dog showing, breeding, and judging activity even though
prospects for revenue were limited and/or remote. He produced no
formal books and records. The expenses were sometimes combined
with those involving the cow and dairy farm activity, making it
difficult to evaluate the success or progress of the business.
With no revenue from the dog breeding activity in any of the
years at issue, the size of the tax losses from the activity,
combined with the substantial enjoyment Zane derived from his
involvement with the dogs, resulted in a situation that has been
11 Because Zane was found to be involved in a profit-
motivated activity with respect to his 2001 cow and dairy farm
activity, no underpayment results and there is no need to
consider the parties’ arguments with respect to the sec. 6662
penalty regarding that activity. To the extent that an
underpayment is attributable to the cow and dairy farm activity
claimed on the Schedule F for 1998, 1999, or 2000, it is
considered in conjunction with the substantially dominant dog
breeding activity.
Page: Previous 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 Next
Last modified: March 27, 2008