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argued their respective cases by addressing each of the nine
criteria enumerated in the regulations, we follow the same
approach in our discussion.
1. Manner in Which the Activity Is Conducted
We begin by examining the manner in which petitioners
carried on their horse-breeding activity. The fact that a
taxpayer carries on the activity in a businesslike manner and
maintains complete and accurate books and records may indicate a
profit objective. Sec. 1.183-2(b)(1) Income Tax Regs. In
deciding whether the taxpayer has conducted the activity in a
businesslike manner, this Court has considered "whether accurate
books are kept, whether the activity is conducted in a manner
similar to other comparable businesses and whether changes have
been attempted in order to make a profit." Ballich v.
Commissioner, T.C. Memo. 1978-497.
Petitioners assert that the fact that they kept invoices and
receipts for the horse-breeding activity is evidence that they
conducted it in a businesslike manner. Although petitioners did
keep an itemized list of expenses, petitioners did not prepare
any business or profit plans, profit or loss statements, balance
sheets, or financial break-even analyses for their horse-breeding
activity. While a taxpayer need not maintain a sophisticated
cost accounting system, the taxpayer should keep records that
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