Arabian Horse Farm Deemed a Hobby, Not a Business, by Tax Court

The owners of an Arabian horse training and breeding operation are liable for tax deficiencies and penalties because their business wasn’t operated for profit and so they couldn’t claim a loss deduction, the US Tax Court ruled Thursday.

Mark and Deborah Himmel failed to demonstrate that they had the requisite financial expertise to engage in the Arabian horse industry, nor did they receive any advice beyond what a horse enthusiast would seek for a hobby, Judge Tamara W. Ashford said.

Under Internal Revenue Code Section 183, activities like hobbies and sports that aren’t primarily carried out for profit can’t ...