Harvey J. Davis and Patricia A. Davis - Page 18

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          investigate the acquisition of or operate the horse activity in             
          the same way he ran his other profitable businesses.                        
               We disagree that petitioners did not conduct their horse               
          activity in a businesslike manner.  Petitioner had a specific               
          concept clearly in mind and pursued it consistently.  He had a              
          business plan in 1990 for petitioners’ horse activity, and he               
          generally followed that plan.  Petitioners’ plan appropriately              
          considered the costs of operating the activity.  Although                   
          petitioners’ business plan did not include a detailed written               
          budget, petitioners’ plan is evidenced by their actions.  See               
          Phillips v. Commissioner, T.C. Memo. 1997-128 (taxpayers engaged            
          in Arabian horse breeding activity for profit; their actions                
          constituted a business plan despite the fact that they had no               
          financial plan or written budget).  Petitioners consulted with              
          and relied on a well-known expert, built a barn, stable, and                
          arena, registered with the Arabian Registry as breeders, and                
          filmed their horses’ performances at horse shows to critique the            
               Petitioners kept complete financial books and records of               
          their horse activity.  Petitioners also kept detailed records on            
          the horses and their training to monitor their successes and                
          failures.  We think the differences in books and records between            
          the horse activity and their other businesses are understandable            

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