An appeals court reversed the Tax Court's decision in a Thoroughbred owner/trainer's case. • Courtesy of John Alan CohanIn a remarkable decision, the 7th Circuit Court of Appeals reversed a Tax Court opinion dealing with a Thoroughbred racehorse owner’s activities. The case, Roberts v. Commissioner, concluded that the taxpayer's horse racing activities were entered into for profit. The Court characterized the Tax Court decision as untenable, in that it in effect concluded that a business's start-up costs were not deductible business expenses and that every business starts as a hobby and becomes a business only when it achieves a certain level of profitability. The 7th Circuit opinion was an embarrassment not only for the Internal Revenue Service (IRS), but for the Tax Court judge in the case, Judge Elizabeth C. Paris.
