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attended medical school so that he could earn sufficient income
to “do something with horses”.4
Petitioner began his breeding activity in 1970 by breeding
an Arabian stallion and then changed his breeding activity in
1976 to the breeding of Arabian mares. Also in 1976, petitioner
bought his first parcel of real estate and built a small barn on
it.
In 1986, petitioner purchased a 78.5-acre parcel of real
estate in Newbury, Ohio, for $222,899. After acquiring the
property, petitioner paid between $25,000 and $30,000 to
refurbish the existing house, $30,000 to build a three-car
garage, $40,000 to create a lake, $20,000 to build an exercise
pen, approximately $20,000 to build run-in sheds, and between
$8,000 and $10,000 to build stalls. Petitioner resided on the
Newbury, Ohio, property during the years in issue.
Petitioner’s 1986 Federal income tax return reported income
and deductions relating to the breeding, training, and showing of
4Petitioner testified:
My father was a banker and had raised four kids, helped
and supported my brother and I to do the horse
activities that we were interested in as high school
students, and I initially thought I was going to become
a school teacher, and my father said, if you ever want
to have horses, you can’t be a school teacher, you’ve
got to find a job where you can make some money, be a
doctor or a dentist, and so, I decided I would go to
medical school so that I could make a decent living and
continue to do something with horses, that I realized
required a considerable amount of money.
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