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away. In 1992, petitioners held an auction at which they sold
all of their inventory. At trial, petitioners did not know how
many antiques they had sold in 1991 and 1992 or what their
inventory was during those years.
Beginning in 1992, petitioners used the building as an
office for their fair (see par. I-D, below) and a place to keep
their books. Petitioners sold the building in 1995 for $35,000.
Olde Bank Antiques had a separate checking account in 1991
and 1992. Olde Bank Antiques never earned a profit. On their
1991 return, petitioners reported gross receipts for Olde Bank
Antiques of $1,885, cost of goods sold of $1,802, and expenses of
$11,035. They did not deduct any wage or advertising expenses
for Olde Bank Antiques. On their 1992 return, petitioners
reported gross receipts for Olde Bank Antiques of $2,589, cost of
goods sold of $4,743, and expenses of $7,496.
C. Blue Horse Farms
1. Petitioners' Horse Breeding and Training
a. Plans and Preparation
Mr. Brockenbrough decided to breed, raise, and train quarter
horses at petitioners' farm in Gay. He had no experience in the
business of breeding, raising, or training horses. Before he
bought any horses, Mr. Brockenbrough investigated the horse
breeding and training business with Earl Bumgarner (Bumgarner),
Bob Roland (Roland), Tommy Cashion (Cashion), Chuck Cole (Cole),
and Max Chase, all of whom were active in the horse business.
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