Melissa S. Spranger - Page 4




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               During 1993 petitioner owned 28 dogs.  Some of the above               
          expenses related to the maintenance (including feeding, grooming,           
          and veterinarian services) of those dogs.  The dogs were kept in            
          an addition to petitioner's residence that was constructed for              
          that purpose.                                                               
               The $525 of income petitioner reported on the Schedule C               
          consists of a single stud fee ($150) and the sale of one puppy              
          ($375).  Stud fees and puppy sales are the only ways in which               
          petitioner expected to generate income from her dog breeding                
          activity.                                                                   
               Dog breeders gain recognition for themselves and their dogs            
          by entering their dogs in shows sanctioned by the American Kennel           
          Club and sponsored by various organizations.  Dogs that have                
          successfully competed in shows attract customers interested in              
          obtaining stud services or purchasing puppies from dogs owned by            
          the breeders.                                                               
               During 1993 petitioner entered only five of her dogs in                
          various shows.  The shows were held at various locations in                 
          different states.  Some shows were scheduled in clusters over a             
          three or four-day period.  Typically petitioner was required to             
          pay a fee to enter her dogs in a show.  The shows did not award             
          cash prizes to the winners.  As explained above, the financial              
          reward for winning came in the form of enhancing the winner's               
          reputation for breeding purposes, which in turn resulted in more            
          demand and higher fees for the breeding services of the winner.             



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