Joseph E. Machado - Page 3

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               From 1979 until 1990, petitioners owned and operated Machado           
          Trucking, Inc. (Machado Trucking), a trucking company that                  
          transported cargo throughout California.  Petitioners each owned            
          50 percent of the outstanding shares of stock in Machado                    
          Trucking.                                                                   

          1980-84                                                                     
               In 1980, petitioners began, as informal partners, to                   
          purchase, breed, and race horses.  Prior thereto, petitioners had           
          little involvement with or experience in breeding and racing                
          horses.  Joseph became interested in breeding and racing horses             
          through gambling on horses, and Robert became interested in                 
          breeding and racing horses through a college horseback riding               
          class and through part-time employment for a horse trainer.                 
               With respect to their horse breeding activity, petitioners'            
          initial stated intention was to purchase broodmares, to breed the           
          broodmares with stallions owned by others, and then to sell the             
          foals as potential racehorses.                                              
               With respect to their horse racing activity, petitioners'              
          initial stated intention was to purchase experienced racehorses             
          and to race the horses throughout California.                               
               Petitioners treated their horse breeding and their horse               
          racing activities as two separate activities.  When petitioners             
          began their horse breeding and horse racing activities,                     







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Last modified: May 25, 2011