Michael T. Shane - Page 10

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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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