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procedures in an effort to help keep down costs. However,
veterinary bills did not represent a significant portion of the
activity's expenses. The vast majority of expenses in connection
with the dog-breeding and showing activity was for boarding and
handling. Petitioners made no attempt to reduce this expense.
To the contrary, the cost of dog boarding and handling increased
precipitously from $19,102 to $88,700 from 1990 to 1992. We
conclude that petitioners did not operate their dog-breeding
activity in a businesslike manner.
2. Expertise of Petitioners
We next consider the expertise of petitioners with respect
to their dog-breeding activity. Sec. 1.183-2(b)(2), Income Tax
Regs. A taxpayer's expertise, research, and study of an
activity, as well as his or her consultation with experts, may be
indicative of a profit intent. Id.
Mr. Smith met with breeders, attended seminars and read
books on the subject of dog breeding. In addition, his medical
background, combined with his attending veterinary seminars,
provided Mr. Smith with some knowledge of basic dog anatomy and
medicine. Nevertheless, the fact that Mr. Smith was "skilled in
the art of dog breeding does not mean that petitioners began or
continued their dog breeding activity for profit." Glenn v.
Commissioner, T.C. Memo. 1995-399, affd. without published
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