In Uncategorized on 11/20/2017 at 16:01

And You Can Take It to The Bank

Judge Paris quotes the immortal cliché at p. 4 of Finis R. Welch and Linda J. Waite, 2017 T. C. Memo. 229, filed 11/20/17. Linda and Finis have split by the time this one came to trial. It’s all about Finis.

And it’s all about Finis’s ranch, all 9K acres of which is styled, with fetching originality, Center Ranch, near Centerville, in Leon County, TX.

Although wheelchair-bound since college, Finis was a major academician, economist, business consultant, and vocational agriculturalist with much income from his consulting business.

Finis started with all cattle (and no hat), but ended with cutting horses. You remember Bettina G. Jary-Mathis, the cutting horse lady who was having too much fun? No? Then see my blogpost “Too Much Fun,” 12/31/13.

Even though Judge Posner dissed Reg. 1.183-2 as “goofy,” and proposed cutting to the cliché when fun and heavy-duty tax losses meet, Judge Paris, unlike Judge Ruwe in my abovecited blogpost, trudges through all nine (count ‘em, nine) factors. See 2017 T. C. Memo. 229, at p. 27.

Finis’s cattle, hay, veterinarian, trucking and horse breeding are all interrelated and are a single activity. Even though Finis’ ranching has seven-figure losses, it did produce seven-figure gross receipts. After all, it takes years before a cutting horse stallion’s offspring show enough stuff so that Daddy  can garner the big bucks.

And Finis goes at it every weekend. He hires and fires managers and ranch hands, makes capital improvements, and reads every publication he can get his hands on. He has no written business plan, but he made plenty of money writing software and consulting without one.

Finis’ expert testifying on the value of the assets (principally the ranch) convinces Judge Paris, especially since the IRS has no expert to counter.

And Finis has a separate bank account for the ranch.

“Center Ranch also had separate bank accounts, which is indicative of an activity being carried on in a businesslike manner.  See Wayts v. Commissioner, T.C. Memo. 1992-82, 63 T.C.M. (CCH) 2032, 2034 (1992) (finding horse racing and breeding activity was carried on in a businesslike manner because it had a separate bank account) (citing Pryor v. Commissioner, T.C. Memo. 1991-109); Hopcus v. Commissioner, T.C. Memo. 1988-181, 55 T.C.M. (CCH) 717, 719 (1988) (finding horse breeding and boarding activity was carried on in a businesslike manner because it had a separate bank account); cf. Faust v. Commissioner, T.C. Memo. 2011-158, 102 T.C.M. (CCH) 16, 17-18 (2011) (finding horse activity was not carried on in a businesslike manner because it did not have a separate bank account).” 2017 T. C. Memo. 229, at pp. 28-29.

Clearly, this is a big deal, so you horsey types take heed and get on down to the bank. Even if they don’t give you a toaster or fifty bucks, open the account. And get horse pictures on the checks.

At close of play, though it might be fun, Finis is trying to make a profit, and wins.

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