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petitioners maintained a business plan, which was to expand their
horse activity so that it could, among other things, support Mrs.
Phillips in the event that Mr. Phillips predeceased her. The
business plan was evidenced by their actions: Petitioners
contracted to build a barn and a tack shop for their horse
activity, bred Bella Joya to produce foals, and registered many
of their Arabians with the International Arabian Horse
Association.
During the years in issue, however, numerous circumstances
beyond their control prevented petitioners from proceeding with
their business expansion plan. Mrs. Phillips encountered several
health problems that prevented her from pursuing petitioners'
horse activity to the fullest. Bella Joya's first foal, which
would likely have garnered a significant amount of income, had to
be put to sleep. The barn was not completed before Mrs.
Phillips' automobile accident, so petitioners had to delay
construction of the barn and tack shop. Consequently,
petitioners continued to sustain boarding expenses and lost
potential boarding income. We consider also the fact that
petitioners were making payments under chapter 13 bankruptcy. We
believe that, during the years in issue, petitioners did all that
they could to sustain their horse activity until Mrs. Phillips
recovered.
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