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vehicles, including repairs, maintenance and actual travel
expenses, totaled $7,402. The marginal costs alone exceeded the
income from the activity by a factor of 12.
We are particularly influenced by petitioner's failure to
consider the extent of stud fees and puppy sales necessary to
cover not only the costs of operating the motor home and truck,
but the other expenses related to the activity as well. She did
not develop a business plan, or prepare a break-even analysis.
Nor did she record the particular income earning history of any
of her dogs, so that the profit potential of the activity could
be better evaluated. The following portion of petitioner's cross
examination demonstrates the complete lack of the type of
planning that is indicative of an activity engaged in for profit:
Q. Prior to the time when you began deducting losses
for your dog activity, did you ever prepare a business
plan?
A. No, sir.
Q. Between 1989 and -- well, until now, have you ever
prepared any profit or loss statements other than a
final tallying for your tax returns?
A. No, sir.
Q. Did you ever prepare a break-even analysis or any
projections of what you might have to earn to make a
profit?
A. No.
Q. Did you prepare any budgets for the activity?
A. No, sir.
Q. Okay. Just based upon your history of losses in
the activity, how much would you have to earn this year
to make a profit on the activity as a whole?
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