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children and that other geldings were used for
bridleless/saddleless teams. Additionally, geldings were helpful
in entertaining children of potential buyers.
We disagree with respondent's contention that petitioners
increased the costs of maintaining their herd. Mrs. Phillips
testified that they attempted to sell some horses but that they
received unacceptably low offers. As to the purchase of two
horses for $1,300 and the outlay of $6,500 in stud fees,
respondent essentially argues that petitioners exercised bad
business judgment as to those transactions. We do not conclude
that the expenses were either inconsistent with a profit motive
or unnecessary and extravagant.
Furthermore, we disagree with respondent's contention that
petitioners' advertising efforts at horse conventions were
ineffectual. As we have stated above, we believe that, during
the years in issue, petitioners were merely sustaining their
horse activity until Mrs. Phillips could proceed with the
expansion plans once she recovered. Although petitioners were
unable to increase substantially the level of horse breeding
during the bankruptcy period, we view their attendance at horse
conventions as efforts to sustain both their name and their
farm's name in the Arabian horse industry. Accordingly, we
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