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argues that "it is petitioners' reactions to these factors which
reveal the most about their motivations in running the activity."
Respondent argues that petitioners continued their activity "as
usual", buying additional horses and breeding more unshowable,
unraceable, and relatively unsalable half Arabians.
Additionally, respondent argues that petitioners could have
avoided bankruptcy altogether by selling Bella Joya for an amount
approximating their total debt.
Respondent argues that petitioners lacked a profit objective
because they only bred Bella Joya twice in 6 years. Respondent
argues that petitioners' decision to place their horse activity
on hold for several years, during which they accumulated another
$280,000 of losses in order to keep Bella Joya, clearly
demonstrates that their actions are motivated by something other
than profits. Additionally, respondent contends that petitioners
could have sold their less productive animals in order to cut
down on expenses. Respondent argues that the fact that they did
not suggests that the real reason for the magnitude of their
losses was their desire to keep all of their horses.
Additionally, respondent argues that the absence of a profit
as far back as 1988 (the first year for which records are
available) indicates the lack of a profit motive. Respondent
argues that Arabian breeding is not a highly speculative venture
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