- 18 -
years at the time of trial. In 1997, he bred about 75 to 80
mares. He had three stallions. About 25 percent of his business
was breeding, including about 10 percent of which was selling
foals. His gross receipts in 1997 were about $200,000, of which
about 25 percent was from breeding. The 5 to 10 breedings per
year which petitioner wrote on the back of her letter to Dixon
are considerably fewer than Emerson's 75 to 80.
Petitioner's letter to Dixon does not show that petitioner
in 1985 had a bona fide objective that her horse activity would
become profitable.
Petitioners contend that petitioner's business plan was to
import dressage horses from Europe and breed and sell them in the
United States. Petitioner thought Temptation, Labrette, and the
stallion Zenit could earn a profit because Planzor had told her
that she could earn $15,000 per foal. This was a dubious
assumption for her to make because she bought brood mares in
Europe for $1,500 to $3,500.
c. Financial Records
Petitioner kept invoices, receipts, canceled checks (and a
spreadsheet summarizing them), and bank statements, which she
gave to the accountant to prepare petitioners' annual returns.
However, petitioner did not have budgets, balance sheets, income
projections, or other financial statements for her horse
activity. There is no evidence that she used her records to help
her evaluate or improve the financial performance of her horse
activity.
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