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was somewhat camouflaged by the polarization of the thoroughbred
industry due to the fact that the upper-end of the market was
controlled by Middle Eastern oil sheiks, who continued to pay top
dollar for yearlings. In the late 1980's, when the sheiks'
demand for thoroughbreds declined, the yearling prices plummeted.
As a result, both newcomers and old-line professional
thoroughbred farmers were faced with substantial losses. In
fact, it was during this time that many of the historically well-
known and successful horse breeding farms went bankrupt.
Respondent further argues that the Johnstons received
personal pleasure and recreational benefits from operating
Bendabout, which is persuasive evidence that the activity was not
engaged in for profit. Respondent notes that during the years in
issue the Johnstons lived on the farm, and petitioner spent time
there hunting and fishing. Moreover, respondent focuses on the
fact that during the years in issue petitioner held a dove hunt
and fish fry at Bendabout to entertain his Coca-Cola colleagues.
We note, however, that the parties stipulated that none of the
losses claimed by petitioners with respect to their farm activity
constituted personal, living, or family expenses. Moreover, at
trial petitioner credibly testified that he paid for the cost of
the annual dove hunt and fish fry out of his pocket.
Respondent contends that because of petitioners' financial
status the losses from Bendabout actually generated a tax
benefit. Given petitioner's substantial other income, it is true
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