- 30 -
that period.11 While it would appear that petitioners
experienced some unforeseen circumstances during the 1980's that
hampered profitability, we do not believe that the problems cited
by petitioners can entirely account for the losses between 1983
and 1987.
Other than a failed effort to lease Docs Fancy Feat for
breeding in 1991 or 1992, petitioners cite no mishaps or other
unforeseen circumstances that interfered with the profitability
of their activity subsequent to his crippling injury in 1988.
Although they argue that the passive loss provisions of the Tax
Reform Act of 1986 (1986 Act), Pub. L. 99-514, sec. 501, 100
Stat. 2233, had a depressive impact on horse prices, we do not
believe any impact from the 1986 Act constitutes an unforeseeable
circumstance into the early 1990's, particularly in the absence
of any post-1986 changes by petitioners in operating methods to
improve profitability. The only significant change, namely, the
decision to switch bloodlines, occurred in 1985.
To account for their losses from the late 1980's through
1995, petitioners cite the career of a second prize stallion,
Colonel Rey Lew. Petitioners cite no mishaps with respect to
Colonel Rey Lew; they appear to rely instead on the lengthy
period of development for a champion cutting horse stallion.
11 Mr. Sullivan testified that he was offered $1.25 million
for Docs Fancy Feat in 1985 by an offeror whose credit references
were negative. There is no evidence to corroborate this claim.
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