Otis W. Jordan and Alma F. Jordan - Page 3

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          earned, or expect to earn from their horse racing activity                  
          resulted, or will result, from purses.                                      
               As of the date of trial, for any given year since acquiring            
          their first race horse in 1986, the income earned from their race           
          horses has never exceeded the expenses that they incurred to                
          maintain, race, and breed their horses.                                     
               During 1994 petitioners entered into two stallion service              
          contracts.  In one they agreed to mate Jordan’s Tan with Gilded             
          Age; the stud fee was $750.  In the other they agreed to mate               
          Hilarious Astro with Two Punch; the stud fee was $3,500.  Two               
          Punch is the grandson of a Kentucky Derby winner.  Over the                 
          years, Two Punch’s offspring have earned over $1,000,000 in                 
          purses.  In the latter stallion service contract, petitioners               
          were guaranteed “a live foal that can stand up and nurse without            
          assistance by midnight of the seventh day after the day of                  
          birth”.  The entire contract with respect to the stallion service           
          contract involving Jordan’s Tan has not been made part of the               
          record, but it appears that it contained a similar guaranty.                
               Hilarious Astro produced a foal in 1994 as a result of being           
          bred to Two Punch.  In 1996, the foal ran into a fence and                  
          injured its leg.                                                            
               During 1994, Otis Jordan was employed by Superior Paving               
          Corp.  His wages from that employment for that year were                    
          $42,128.20.  Other than the horse racing activity, his wages were           
          petitioners’ sole source of income.  He devoted some time to the            

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