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substantial income that was sheltered from the losses from the
activity in issue; (4) certain expenses taken by petitioners were
not farm related; (5) petitioners' only records on their horses'
bloodlines were registration applications; and (6) petitioners
had a consistent history of losses during 1987 through 1993.
From the foregoing facts, a reasonable person could infer
that petitioners' horse activity was not entered into for profit.
It was not until petitioners testified at trial and presented
other persuasive evidence to overcome the negative inferences of
such facts that petitioners were able to prevail. Consequently,
in the instant case, we conclude that respondent had a reasonable
basis in fact and law for the position that petitioners did not
have an actual and honest profit objective.
As we have concluded that respondent's position was
substantially justified, we need not consider the issue of
whether the amount of attorney's fees claimed by petitioners is
reasonable.
To reflect the foregoing,
An appropriate order
will be issued.
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