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Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
After concessions, the issue for decision is whether
petitioners are entitled to certain deductions relating to their
horse training and breeding activity (the Activity)1 for 1988 and
1989, and if petitioners are not entitled to deductions, whether
they are liable for additions to tax and a penalty.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The Stipulation of Settled Issues is incorporated by this
reference.
Petitioners resided in Riverside, California, when the
petition in this case was filed. Petitioners were divorced in
1989.
Petitioners have three children, Jeanette, Joshua, and Ann.
During the years in issue Steven F. Dawson was a full-time
employee of the Southern Pacific Railroad, where he worked the
graveyard shift (i.e., 11 p.m. to 7 a.m.) as a pipe fitter. He
also devoted about 20 hours a week to his carpet cleaning
business. Mrs. Dawson, who was a professional bookkeeper during
1 The Activity refers to Mr. and Mrs. Dawson's horse
training and breeding activity in 1988 and Mr. Dawson's horse
training and breeding activity in 1989.
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