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activities, they consulted with individuals who have had some
success in breeding Paso Fino horses. Petitioners also argue
that since commencing operation of Silk Oak, they have attempted
to increase profitability by improving their training techniques,
enhancing the bloodlines of their foals, and proposing a move of
their ranching activities to Texas, where expenses are
purportedly lower. Respondent asserts that petitioners'
testimony concerning advice received from other Paso Fino
breeders was vague and self-serving and yielded no written
business plan. Likewise, respondent contends that petitioners
offered no specific evidence to establish that a relocation to
Texas would enhance profit opportunities. Furthermore,
respondent maintains that Silk Oak's consistent losses indicate
that the changes implemented by petitioners were modest and have
had little impact.
The record indicates that expenses and losses have steadily
increased over time, and petitioners have not presented a
detailed written profit plan. Although petitioners sought advice
from several successful Paso Fino breeders, their testimony in
this regard was vague and the meetings yielded no concrete plan
of operation. Petitioners decided to commence operation of Silk
Oak with little concept of the expenses involved or of the steps
involved to achieve cost efficiency and an eventual profit.
Daley v. Commissioner, T.C. Memo. 1996-259. Furthermore, in the
face of mounting losses, petitioners have failed to materially
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