[IMGCAP(1)]Back in 1925, a taxpayer won the first case in the Board of Tax Appeals involving the deduction for horse-breeding activity expenses. Deducting expenses related to the “sport of kings” was so attractive that the estate of Cornelius Vanderbilt tried, and lost, two years later. In the intervening 88 years, about 200 taxpayers have litigated the issue, most with unattractive results. The IRS and the courts have essentially told taxpayers to “stop horsing around.”

In less than a month (February 20 - March 13, 2013) the Tax Court recently decided three more horse-breeding cases. Unsurprisingly, all three taxpayers lost. However, one had quite a surprise when it came to the penalty.

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