Steven F. and Kathryn A. Dawson - Page 8

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          regularly consulted with Mil Barton.  Mr. Barton, with his 40               
          years of experience in the horse breeding and showing business,             
          advised petitioners on how to breed a successful horse and how to           
          make a profit in the Activity.  In addition, petitioners hired              
          veterinarians and trainers to board and care for their horses.              
          These facts are consistent with petitioners' intention to make a            
          III.  Time Devoted to the Activity                                          
               The fact that a taxpayer devotes substantial personal time             
          and effort to carrying on an activity may indicate an intention             
          to derive a profit.  Sec. 1.183-2(b)(3), Income Tax Regs.  The              
          fact that the taxpayer devotes a limited amount of time to an               
          activity, however, does not necessarily indicate a lack of profit           
          objective where the taxpayer employs competent and qualified                
          persons to carry on the activity.  Id.                                      
               Petitioners did not personally devote a substantial amount             
          of time to the Activity.  They did, however, hire competent and             
          qualified persons to assist them in conducting the Activity.                
          Petitioners hired Mil Barton and Mike Van Leuven to perform the             
          training necessary to produce a quality show horse.  Mr. Barton             
          fed and cared for Hot Twist and attended horse shows with Hot               
          Twist when Mr. Dawson could not attend.  As discussed above, Mr.            
          Barton was competent and qualified in the horse breeding and                
          showing business.  As a result, the fact that petitioners did not           

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