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Petitioners' Virginia farm and land, purchased in 1988 for
$90,000, were appraised during 1995 at a fair market value of
$155,000. Petitioners' 8 registered quarter horses were
appraised during 1995 at a total fair market value of $10,000.
Petitioners' 22 registered Arabian horses were appraised during
1995 at a total fair market value of between $86,000 and $96,000.
Petitioners own 6 horses which were not appraised because they
are half Arabian/half quarter horse, and petitioners thought that
they were not worth insuring.
During the years in issue, petitioners incurred losses on
their horse activity as follows:
Income Depreciation Other Expenses Income/(Loss)
1991 $114 ( $6,274) ( $56,874) ( $63,034)
1992 - ( 7,756) ( 61,235) ( 68,991)
1993 - ( 7,697) ( 54,513) ( 62,210)
$114 ($21,727) ($172,622) ($194,235)
During the years in issue, petitioners received income from Mr.
Phillips' military retirement pay and other sources, as follows:
Wages Retirement Pay Interest & Dividends Total
1991 $74,246 $25,464 $21 $99,731
1992 87,432 26,384 125 113,941
1993 89,271 27,180 129 116,580
Losses sustained by petitioners were out-of-pocket economic
losses with the exception of amounts deducted for depreciation.
Since 1988, Mr. Phillips inherited approximately $25,000 to
$30,000, all of which petitioners invested in their horse
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