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college she and Mr. Sullivan bought back the horse she had ridden
during high school. More recent evidence of the importance to
Mrs. Sullivan of personally competing in cutting horse
competitions occurred in 1992, when petitioners engaged in an
essentially noneconomic transaction of contracting for the
purchase and sale-back of a horse for a nominal price so that
Mrs. Sullivan would have a mount for cutting horse competition
while their prize stallion was being ridden by Mr. Hightower.
Conclusion
The most compelling factor in this case is the extent of
petitioners' history of losses--23 of 26 years. For all years in
which information is available, those losses were substantial,
averaging $40,000 annually. Petitioners' attempts to account for
losses over this lengthy period are unpersuasive. Also striking
is the absence of any significant attempt since 1985 to modify
methods of operation to improve profitability, even though losses
have been continuous since 1982. The extent of petitioners'
losses and their complacency therein outweigh any unforeseen
circumstances cited by petitioners, the time and effort expended
by Mrs. Sullivan, and any business purpose that may be evidenced
by their keeping stallions rather than only mares or geldings.
When combined with the recreational elements of keeping and
showing horses, we believe that petitioners' failure to take
action to address losses of this magnitude creates a compelling
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