Eugene J. Phillips and Barbara A. Phillips - Page 8

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               Petitioners registered many of their Arabian horses with the           
          International Arabian Horse Association.  Registering a horse               
          entails hiring a veterinarian; paying for a representative of the           
          International Arabian Horse Association to be present; having a             
          blood test performed on the horse; freeze branding the horse on             
          the neck and, if it is racing, in the lip; and preparing                    
          registration papers.  Each registration costs several hundred               
          dollars.                                                                    
               During the years 1988 to the present, petitioners owned 32             
          horses, excluding 5 foals that they sold.  During those same                
          years, 9 of petitioners' 32 horses have been bred.  Finally,                
          during those years, 5 horses have been sold, for a total of                 
          approximately $2,600.  During the years 1988 to the present, none           
          of petitioners' horses has raced or competed in shows, except on            
          a very minor basis.  No show activity was conducted for income.             
          After moving to Virginia, petitioners received several offers to            
          purchase various horses, but petitioners accepted none of them,             
          deeming them too low.  Petitioners did not place any of their               
          horses for sale at auctions.                                                
               Petitioners used their geldings for teaching or show                   
          purposes, trail riding, and carriages.  Additionally, petitioners           
          used one gelding for Special Olympics children and showed him.              
          Other geldings are used for bridleless/saddleless teams.                    
          Finally, petitioners used geldings for children of potential                
          buyers to ride when visiting petitioners' farm.                             




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