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business named Madera Farm. Primarily, farm income was from the
sale of figs and pistachios.
Petitioners first became involved in dog-showing activities
in 1987 when they purchased their first show dog, a standard
poodle. Although petitioners had no interest in dog-breeding
activity in 1987, they built a kennel at their Los Gatos
residence in order to care for a growing number of dogs.
Petitioners became interested in dog-breeding activity during
1989, at which time they began to consult with dog breeders and
research the subject of dog breeding. Mr. Smith also attended
veterinarian seminars for dog breeders.
Petitioners, in addition to breeding standard poodles (a
more common breed), decided to breed Portuguese water dogs (a
rare breed) in the hopes of commanding higher prices. Their goal
was to produce the highest quality dog possible. Mr. Smith did
not prepare formal spreadsheets on the potential profitability of
dog breeding, but he did estimate the annual potential to earn
between $30,000 and $50,000 in gross receipts from dog breeding.
Mr. Smith did not commit these estimates to writing. Petitioners
did not consult with economic advisers or accountants prior to
beginning their dog-breeding activity.
Petitioners placed their names on a waiting list and
eventually received two Portuguese water dogs. Petitioners were
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