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to be a horse owner and purchased his first thoroughbred racing
horse. He later acquired other horses but never owned more than
three horses at any given time. Prior to acquisition of his
first horse, petitioner did research as to the cost of
maintaining and training a racehorse, the potential revenue that
could be made if a horse won a "certain caliber of race", and the
rules and regulations of horse racing. Petitioner hired horse
trainers and boarded his horses at various race tracks. In 1990,
the year at issue, petitioner owned three thoroughbreds. None of
these were able to race during 1990 because they were all
injured. From 1985 to 1990, horses owned by petitioner won a few
minor races. The activity never realized a profit. Following
1990, petitioner continued the activity with no greater degree of
success until 1992 or 1993.
On his 1990 Federal income tax return, petitioner reported
expenses for training and veterinarians of $22,100, no gross
income, and a net loss of $22,100 from his horse racing activity.
Petitioner reported wage income of $91,423 from Allied.
In the notice of deficiency, respondent disallowed the horse
racing activity loss, determining the horse racing activity was
an activity not engaged in for profit under section 183, and that
petitioner had not properly substantiated the claimed expenses.
At trial, respondent conceded that the claimed expenses had been
substantiated.
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