Harvey J. Davis and Patricia A. Davis - Page 14





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          computer data was lost sometime thereafter and petitioners                  
          resumed keeping their receipts and handwritten summaries.                   
               6.   Petitioners’ Personal Enjoyment of Horses                         
               Petitioners ride their horses only to train or show them.              
          Petitioners’ children and grandchildren do not ride petitioners’            
          horses.                                                                     
               Petitioner finds his Arabian horse activity to be rewarding.           
          He enjoys showing the horses, competing at the shows, and the               
          camaraderie of other horse people at the shows.  Petitioner does            
          not enjoy the amount of driving that is required to participate             
          in horse shows or to train petitioners’ horses at McDannalds.               
               7.   Petitioners' Gross Income, Appreciation, and                      
                    Horse-Related Losses                                              
               Petitioners reported the following amount of taxable income            
          on their tax returns from 1990 to 1996:                                     
        Taxable income           Horse                                                
             (other than         expenses                                             
             horse     Horse     including                Horse     Taxable           
        Year   activity)     income  depreciation  Depreciation  lossesincome            
        1990   $263,832      -0- ($10,938)      ($3,600)  ($10,938)  $252,894         
        1991     49,749     $120 (20,544)       (6,369)   (20,424)    29,325          
        1992     46,824      205 (19,652)       (4,729)   (23,935)    22,889          
        1993     44,498      190 (23,346)       (3,912)   (23,172)    21,326          
        1994     57,596      295 (26,018)       (4,493)   (25,723)    31,873          
        1995     60,215      519 (33,478)       (3,490)   (32,959)    27,256          
        1996      55,969      434(29,164)       (2,572)   (28,730)    27,239          
               Petitioners reported on financial statements dated August              
          11, 1992, and June 11, 1993, that their horses were worth                   
          $34,000.  They reported on a financial statement dated July 21,             
          1995, that their livestock was worth $80,500.                               







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