Joseph E. Machado - Page 4

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          petitioners did not consult experts regarding the business and              
          economic aspects of horse breeding and horse racing.                        
               During 1980 through 1984, petitioners purchased 5                      
          broodmares, 16 racehorses, and a share interest in 2 stallions.             
          Prior to purchasing a horse, petitioners researched the horse's             
          lineage and success as a racehorse, and petitioners talked to               
          various trainers and breeding agents.  Prior to breeding their              
          broodmares with stallions, petitioners researched the stallions'            
          lineage and racing history.                                                 
               Petitioners read books and periodicals pertaining to the               
          techniques of horse breeding and horse racing.                              
               Generally, petitioners shared equally the ownership interest           
          in each of the broodmares, racehorses, and stallions, and they              
          shared equally the expenses and income associated with their                
          horse breeding and horse racing activities.                                 
               Petitioners did not own facilities in which to stable their            
          horses.  Petitioners' broodmares and the two stallions in which             
          they purchased a share interest were stabled at commercial                  
          stables in Kentucky, Maryland, and Florida.  Petitioners'                   
          racehorses were stabled at commercial stables in California.                
               The operators of the commercial stables were responsible for           
          the general care and maintenance of petitioners' horses and for             
          supervision of the breeding of petitioners' broodmares.                     
          Trainers were hired for the training of petitioners' experienced            
          racehorses.                                                                 




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