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cutting horses. She, therefore, changed her operation to that
specialty. It is that change that petitioner claims resulted in
her realization of a net profit for 1998. Petitioner regularly
attended horse shows, was a member of various associations
related thereto, had business cards, and advertised in trade
journals or newspapers. Petitioner's sales of horses, however,
were minimal. The purchaser of three horses was Cecil Valdez,
who owned other horses at the same location with petitioner.
Another purchaser was an unrelated party.
Petitioner was of the belief that a market for her horses
would be in Mexico; however, that did not materialize because of
the decline in value of the Mexican peso. Petitioner also
attributed her losses to the fact that she did not have a
sufficient number of brood mares and that the bloodlines of her
horses were not of the quality that would be in demand. She
claimed that her chances of success would be enhanced by
specializing with cutting horses rather than the other
specialties stated above. She acknowledged her goal was to
produce a $100,000 horse; however, to do that, she would be
required to pay breeding or stud fees of at least $10,000, which
she was not capable of doing. During the years at issue,
petitioner paid $750 for stud fees. With respect to
participation in horse shows, participants were either
professionals or amateurs. Petitioner always participated as an
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