Engdahl v. Commissioner
Tax Court of the United States
72 T.C. 659 (1979)
Relevant factsFree
After retiring, Dr. Engdahl and his wife (plaintiffs) researched horse breeding by consulting veterinarians, trainers, and breeders, kept detailed financial records reviewed quarterly by an accountant, deposited horse income separately, and eventually bought a ranch to house the horses and cut costs; despite working 35 to 55 hours weekly on the operation, culling horses that didn't meet show or breeding standards, and never riding or forming emotional attachments to the horses, they lost money every year and deducted the losses, which the IRS disallowed.
IssueFree
Whether an individual can deduct losses resulting from an activity if the individual is engaged in the activity for profit.