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horse had been valued by the recipient educational institution,
when such was not the case,5 his credibility is subject to some
doubt, and we give his testimony less weight as a result.
Manner in Which Activity Conducted
The fact that a taxpayer carries on an activity in a
businesslike manner and maintains complete and accurate books and
records may indicate that the activity was engaged in for profit.
See sec. 1.183-2(b)(1), Income Tax Regs. The record is replete
with instances where petitioners did not conduct the show horse
activity in a businesslike manner. Petitioners had no written
business plan. Asked to describe his business plan at trial, Dr.
Hillman testified that it was to concentrate on breeding so that
he would eventually build up a small herd. Yet petitioners had
two of their three stallions gelded, and, so far as the record
indicates, the third stallion--Ben Hur, who had produced several
offspring prior to acquisition by petitioners--was bred only with
Ashley, petitioners’ mare with a history of foaling failures.
Ashley was petitioners’ sole mare, and she suffered three
miscarriages before petitioners donated her to a veterinary
school in 1994. Nevertheless, there is no evidence that
petitioners ever sought a replacement mare, either during
5 A representative of the institution testified at trial,
without contradiction or challenge, that the institution never
provided appraisals of donated property and did not do so in the
case of Dr. Hillman’s donation.
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