Hillman v. Commissioner, T.C. Memo 1999-255

  
 
<<FULL TEXT>>
 
T.C. Memo. 1999-255

 
UNITED STATES TAX COURT

 
BARRY S. AND YVONNE C. HILLMAN, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
 
Docket No. 16506-97. Filed August 2, 1999.
 
 
Arnold O. Zacks, for petitioners.
 
John J. Boyle, for respondent.

 
 
MEMORANDUM FINDINGS OF FACT AND OPINION

 
 
GALE, Judge: Respondent determined the following deficiencies and accuracy-related penalties with respect to petitioners' Federal income tax:
 
 

 
Unless otherwise noted, all section references are to the Internal Revenue Code in effect for the years in issue. All Rule references are to the Tax Court Rules of Practice and Procedure. All dollar amounts are rounded to the nearest dollar.
 
The issues for decision are: (1) Whether petitioners' activity relating to the breeding and showing of horses was an activity engaged in for profit. We hold that it was not. (2) Whether petitioners are entitled to business mileage deductions over and above the amounts respondent has allowed. We hold that they are not. (3) Whether petitioners are liable for accuracy-related penalties under section 6662(a). We hold that they are.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. We incorporate by this reference the stipulation of facts and attached exhibits.
 
At the time of filing the petition, petitioners resided in Lewis Center, Ohio. Petitioners filed joint tax returns for the years in issue,
which were prepared by Barry Adelman, CPA.
 

HORSE-RELATED ACTIVITIES

Petitioners were married in 1969 and have two children, Todd and Denise. Denise was born in 1974, and she has received training in showing horses since 1982, when she was 8 years old. During the years in issue, petitioners lived in a residence situated on 8.5 acres, on which was also located a garage, seven-stall barn, riding arena for horses, pasture land, and an acre of trail and woods.
 
Petitioner Barry Hillman (Dr. Hillman) was 64 years old at the time of trial and a medical doctor. During the years at issue and continuing through the time of trial, Dr. Hillman operated a medical practice in Columbus, Ohio, as a sole practitioner with three employees. Petitioner Yvonne Hillman has assisted Dr. Hillman in his medical practice as an office worker since 1969. During the years in issue, Mrs. Hillman was Dr. Hillman's office manager and kept the books for his medical practice. She was paid $3,600 in annual wages during 1993 and 1994 for which she was issued Forms W-2. Petitioners provided Mr. Adelman with all original checks, deposit slips, and financial records for Dr. Hillman's medical practice. In 1993 and 1994, Dr. Hillman devoted between 45 and 50 hours per week to the practice.
 
On their 1991, 1992, 1993, 1994, 1995, and 1996 joint returns,
<<ENDNOTE 1>> petitioners reported the following income and expenses from Dr. Hillman's medical practice on Schedule C:
 
 

 
 
In 1993 and 1994, Dr. Hillman also reported on Schedule C consulting fees in the amounts of $5,000 and $10,000, respectively.
 
On their joint returns for the 1991, 1992, 1993, 1994, 1995, and 1996 taxable years, petitioners reported an activity described as "show horses" on Schedule C. Since 1991, petitioners have reported the following income and expenses with respect to their show horse activity:
 
 

 
 
The expenses that petitioners claimed with respect to their show horse activity consisted of the following items and amounts:
 
 

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