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Petitioners were very serious about their horse activities
and operated them in a businesslike manner. Petitioners maintained
extensive records and kept complete accounts of their expenses from
their horse activities for the years in issue. Bonde, petitioners'
horse trainer, testified that petitioner checked every piece of
paperwork involved with his horses, including medical charts and
veterinarian bills. Bonde further testified that petitioner expects
a great deal from a trainer, including providing a leading rider to
ride his horses.
In addition, petitioners had a business plan, which was to
earn money by breeding top horses to run in superior races. This
plan was evidenced by petitioner's actions and attempted changes to
improve profitability. Petitioner consulted with knowledgeable
individuals about horse breeding and began to "breed up" by
upgrading his brood mares and the stallions with which they were
bred. This plan has produced foals which have been performing
better at the racetrack. Based on the facts of this case, we find
that petitioners conducted their horse activities in a businesslike
manner, and this indicates a profit motive. Sec. 1.183-2(b)(1),
Income Tax Regs.
A taxpayer's expertise, research, and study of an activity,
as well as his consultation with experts, may be indicative of a
profit motive. Sec. 1.183-2(b)(2), Income Tax Regs. Petitioners
consulted Bonde as the trainer of their racehorses. Bonde has been
training horses for 25 years, at the time of trial had approximately 30
clients, and trains between 20 and 50 horses at one time. Adams, the
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