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bank account for the Activity. Further, petitioners abandoned
the Arabian horse breeding business when Mr. Dawson realized that
it would be unprofitable. Petitioners then sought a more
profitable enterprise and decided to breed paint horses. Their
goal was to develop Hot Twist into a marketable stud.
Respondent contends that petitioners did not use business
records to evaluate the financial status of the Activity. We
conclude that this contention does not necessarily undermine
petitioners' position. Petitioners owned only three horses.
They employed only one trainer at a time, and only one horse was
shown in 1988. No horses were shown in 1989. We believe that
petitioners were adequately aware of the results of their rather
simple operation. Their failure to establish that they analyzed
their books and records is not determinative of this issue.
II. Expertise
Preparation for an activity by extensive study of its
accepted business, economic, and scientific practices, or
consultation with those who possess expertise in the activity,
may indicate that the taxpayer has a profit objective. Sec.
1.183-2(b)(2), Income Tax Regs.
Respondent contends that petitioners did not consult experts
for advice regarding the operation of the Activity. We, however,
believe Mr. Barton's uncontradicted testimony that petitioners
sought and received his advice. While Mr. Dawson was not an
expert in the training, breeding, or showing of horses, he
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