4
afford them, and he believed those involved in equestrian
activities, traditionally an activity of the wealthy, would be a
source of patients for him.
Initially, in some years prior to those before us,
petitioner kept horses at an independent ranch. Petitioner began
looking for land to purchase to start his own ranch, to avoid
paying the fees to the independent ranch, and to facilitate
breeding. Petitioner intended to retire to the ranch and
possibly open a small family practice, or in the alternative to
sell the ranch upon retirement. He stated at trial that a horse
ranch would allow him to occupy himself with something about
which he had some know-how, a statement that may have startled
some of his patients.
On March 31, 1987, petitioners purchased 52 acres in Bandera
County, Texas, for $287,250. On October 7, 1988, petitioners
purchased 50-acre and 10-acre pieces of property in Bandera
County, Texas, each for $105,000. The total cost basis in the
properties (considered as a whole) was $497,250.
At the end of 1988, petitioners hired a Mr. White to live on
the ranch and act as foreman. Petitioner initially bought and
sold horses, and later added the training and breeding of horses,
a cattle business, a hay business, deer and goat operations, a
general store, and guest accommodations.
Petitioner considered that polo ponies could sell for as
much as $20,000, but he aimed to sell them in the $5,000 to
$6,000 range. Petitioner targeted new polo players as customers;
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