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Memo. 1992-343; sec. 1.183-2(b)(1), Income Tax Regs. We find
that petitioner conducted his horse activity in a businesslike
manner. Although petitioner did not maintain a separate checking
account in the conduct of his financial affairs relating to his
horse activity, we find his testimony explaining his rationale
for not doing so credible. Petitioner testified that, given the
scale of his operation, keeping costs low was a principal
concern. Petitioner further testified that conducting his
business affairs through his personal checking account was
advantageous because his financial institution did not charge a
fee for managing personal checking accounts but did charge a fee
for managing business checking accounts. Additionally,
petitioner testified that he managed his dual-purpose checking
account via a self-generated computer program fully capable of
distinguishing between business and personal expenditures.
Accordingly, petitioner was able to avoid an expense without
compromising the accuracy of his check register.
Moreover, after experiencing an extended period of
unpromising results from the racing component of his horse
activity, petitioner redirected the focus of his operation,
placing increased attention on its breeding aspect and
discontinuing to a large extent its racing aspect. The
discontinuation of an unprofitable branch of operations indicates
a profit objective. Allen v. Commissioner, 72 T.C. 28 (1979);
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