The Oregon Tax Court ruled in Medford v. Oregon Dep’t of Revenue that the Medfords’ horse boarding business expenses were deductible as ordinary and necessary business expenses, rejecting the Department of Revenue’s classification of the losses as non-deductible hobby losses. Despite the business being profitable only one year from 2013 to 2019 and having imperfect record-keeping and management, the court found that the Medfords operated with a genuine profit motive. The couple’s full-time labor, investment in expanding the facility, and businesslike operations demonstrated an intent to run a profitable enterprise, which outweighed the Department’s concerns about financial controls and business planning.

This case highlights that tax law does not require perfection in business operations or record-keeping to qualify for deductions. Taxpayers need only show they acted with an intent to make a profit, even if mistakes were made or the business was not consistently profitable. The ruling serves as a reminder that auditors’ subjective opinions about how a business should be run do not override the legal standards for deductibility, and taxpayers should not be intimidated by such challenges.