James D. Schlicher - Page 16

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          Clayton property for business and that the remaining 43-� acres             
          were used as his residence.  To support his position, petitioner            
          relies on cases, such as Richards v. Commissioner, T.C. Memo.               
          1993-422 (respondent agreed that the taxpayer's homesite and 28.6           
          acres of dry pasture land constituted residential property);                
          Estate of Campbell v. Commissioner, T.C. Memo. 1964-83 (where the           
          taxpayer's residence is part of a property also used for                    
          business, nonrecognition applies not only to the home itself, but           
          to the environs and outbuildings relating to the dwelling unit);            
          and Bennett v. United States, 61-2 USTC par. 9697, 8 AFTR2d 5593            
          (N.D. Ga. 1961) (the taxpayer's residence included an entire 65-            
          acre tract, rather than the 2-� acres determined by respondent).            
          We agree with petitioner.                                                   
               At trial, petitioner testified that at any given time, he              
          boarded an average of 30 horses on the Clayton premises, which              
          was approximately the same number of horses that he boarded in              
          Livermore.  Petitioner kept these horses fenced off from the                
          remainder of the Clayton property using special fencing safe for            
          horses. In the fenced area there is a 20-stall barn and paddocks.           
          Petitioner keeps some of the boarded horses in the stalls, some             
          in the fenced areas outside, while others remain in the paddocks.           
          At trial, petitioner testified, and we find as fact that the                
          boarded horses were never allowed on the upper section of the               
          property.  The testimony of Mr. Vogel, the revenue agent called             
          as a witness for respondent, supports petitioner's testimony.  At           

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