Petitioners V. Richards Case Digest Summary
Rick Richards, et ux. v. Commissioner
Facts:
The petitioners, Mr. Richards and Mrs. Richards,
Issues:
1. Whether petitioner (both Mr. Richards and Mrs. Richards) conducted their writing or acting activities with the objective of making a profit within the meaning of §186?
2. Whether petitioners have substantiated the ordinary and necessary business expense of these activities?
3. Whether petitioners are entitled to carry forward a net operating loss from a prior tax year
4. Whether petitioners are liable for the accuracy-related penalty under §6662(a)
Holdings:
1. Yes, during the year at issue, Mr. Richards was engaged in his writing activity with the requisite profit objective. Similarly, Mrs. Richards was also engaged in the actress-model activity with the requisite profit objective.
2. Taxpayers could deduct expense they substantiated with receipts and showed were related to their activities. But taxpayers were denied deductions for expenses they didn’t substantiate or show were related to …show more content…
Prieto, works for a medical practice while making decent income within years. His wife, Mrs. Prieto, spends a considerable amount of time working in the same medical practice. Under the strong interest of riding horses for both the petitioners and their children, they engaged in a horse activity that included purchasing, training, showing and selling horses. Petitioner created logo for the business but does not have a written business plan; neither makes a budget for the horse activity. In later years, petitioners entered their horses in at least 15 different shows and become recognized. However, the horse activity sustained losses, and the petitioners deducted these losses from their income each year. They attempted to cut losses due to cash shortage but did not even inform the “bookkeeper” how much money they were losing. During 2000, petitioners closed up the horse activity, mainly because their children are old enough and move
Facts:
The petitioners, Mr. Richards and Mrs. Richards,
Issues:
1. Whether petitioner (both Mr. Richards and Mrs. Richards) conducted their writing or acting activities with the objective of making a profit within the meaning of §186?
2. Whether petitioners have substantiated the ordinary and necessary business expense of these activities?
3. Whether petitioners are entitled to carry forward a net operating loss from a prior tax year
4. Whether petitioners are liable for the accuracy-related penalty under §6662(a)
Holdings:
1. Yes, during the year at issue, Mr. Richards was engaged in his writing activity with the requisite profit objective. Similarly, Mrs. Richards was also engaged in the actress-model activity with the requisite profit objective.
2. Taxpayers could deduct expense they substantiated with receipts and showed were related to their activities. But taxpayers were denied deductions for expenses they didn’t substantiate or show were related to …show more content…
Prieto, works for a medical practice while making decent income within years. His wife, Mrs. Prieto, spends a considerable amount of time working in the same medical practice. Under the strong interest of riding horses for both the petitioners and their children, they engaged in a horse activity that included purchasing, training, showing and selling horses. Petitioner created logo for the business but does not have a written business plan; neither makes a budget for the horse activity. In later years, petitioners entered their horses in at least 15 different shows and become recognized. However, the horse activity sustained losses, and the petitioners deducted these losses from their income each year. They attempted to cut losses due to cash shortage but did not even inform the “bookkeeper” how much money they were losing. During 2000, petitioners closed up the horse activity, mainly because their children are old enough and move