Harvey J. Davis and Patricia A. Davis - Page 12





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               Petitioner built the arena in 1990 by himself for the horses           
          to exercise.  Petitioners do all of the maintenance and repairs             
          on the fence and the buildings.                                             
               In December 1998, petitioners’ property, including the farm            
          improvements, was worth $155,000.  The farm improvements had a              
          fair market value, as of December 23, 1998, of $47,000.                     
               5.   Operations                                                        
               Petitioners spent much of their free time training, showing,           
          and caring for their horses.  In 1995, petitioner spent more than           
          1,600 hours and Mrs. Davis spent more than 700 hours on the horse           
          activity.  Petitioner had no other full-time employment during              
          the years in issue.                                                         
               Petitioner spent a large amount of time each week from 1991            
          through the years in issue caring for and training petitioners’             
          horses at the McDannald Arabian facility.  Petitioners provided             
          all of the care for their horses except when the horses were at             
          McDannald’s farm.                                                           
               Petitioners were actively involved in preparing their horses           
          for the show ring during the years in issue.  Petitioners filmed            
          each of their horses at horse shows so they could critique their            
          performance.                                                                
               In 1994, petitioners named their horse activity “Midwest               
          Spanish Arabians”.  In 1995, petitioner began to use letterhead             
          with the Midwest Spanish Arabians logo for their horse activity.            






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