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the burden of proof on all issues in dispute in this case.
Golanty v. Commissioner, 72 T.C. 411, 426 (1979), affd. without
published opinion 647 F.2d 170 (9th Cir. 1981).
B. Application of the Factors
1. Manner in Which the Taxpayer Conducted the Activity
Conducting an activity in a manner substantially like
comparable businesses which are profitable may indicate that a
taxpayer conducted the activity for profit. Engdahl v.
Commissioner, 72 T.C. 659, 666-667 (1979).
a. Basic Investigation
Careful investigation of a potential business to ensure the
best chance for profitability strongly indicates an objective to
engage in the activity for profit. Sec. 1.183-2(b)(2), Income
Tax Regs. Petitioner studied horse competitions and breeding
before she began her activity. However, she did not seriously
investigate the activity's potential for profit.
b. Business Plan
Petitioners contend that petitioner's notes on the back of
her letter to Dixon show that petitioner had a business plan and
showed her projected income and expenses. We disagree. The
notes do not show petitioner's projected income and expenses or
even that she was contemplating making a profit. Those notes
show primarily that she had an interest in horses, not
necessarily an interest in business.
Petitioners' expert, Edward E. Emerson, Jr. (Emerson), had
been in the horse training and breeding business for more than 25
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