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several hours each morning caring for his horses prior to going
to his full-time job. Petitioner also testified that he spent
several hours each night similarly caring for his horses.
Petitioner further testified that on numerous occasions the
nature of his work kept him at the boarding facility until
midnight. On many of these occasions, rather than commute to his
residence only to commute back to the boarding facility 4 or 5
hours later, petitioner testified that he slept in his automobile
at the boarding facility.
Fourth, an expectation that assets used in the activity may
appreciate in value may be an indication of a profit objective.
Engdahl v. Commissioner, 72 T.C. at 668; Anderson v.
Commissioner, T.C. Memo. 1992-102; sec. 1.183-2(b)(4), Income Tax
Regs. The expectation that he would experience appreciation in
the value of his horses was a principal factor underlying
petitioner's motivation for maintaining his horses. During the
early years of his operation, petitioner concentrated on racing.
In doing so, petitioner may have been somewhat less inclined to
expect his horses to appreciate in value. But petitioner altered
the focus of his activity and began concentrating heavily on
breeding. Here asset appreciation was petitioner's principal
expectation. Petitioner studied pedigree records in order to
determine what he believed to be good breeding combinations.
Petitioner, as would seem customary among horse breeders,
expected that it was through this system of selective breeding
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