Prieto v. Commissioner
United States Tax Court
T.C. Memo. 2001-266 (2001)
Relevant factsFree
Successful orthopedic surgeon Victor Prieto and his wife (plaintiffs) ran a horse-purchasing, training, and showing operation primarily for their children's enjoyment, run at an average annual loss exceeding $300,000 over eight years, with poor recordkeeping, an inexperienced 18-year-old trainer, and their children choosing which horses to buy; the commissioner (defendant) disallowed the Prietos' deduction of these losses as business expenses.
IssueFree
Whether, under federal tax law, a taxpayer may deduct a business expense only if the activity is entered into with a bona fide expectation of profit.