Louis J. Novak - Page 12




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          activity would become profitable.  They performed a detailed                
          analysis of their horse activity.  Petitioner did not have such             
          plans.  He has not prepared a profit plan for his horse activity.           
          He did not prepare any written analysis in order to determine how           
          he could make a profit or what he would have to do to break even.           
          Petitioner has not consulted with persons with expertise                    
          regarding the financial aspects of his horse activity.                      
          Petitioner testified that his current goal is to continue his               
          horse activity but to do so more efficiently.  Petitioner                   
          admitted at trial that he will never be able to recoup what he              
          has spent on his activity thus far.                                         
               Some of petitioner’s actions seem to run contrary to a                 
          profit objective.  Petitioner testified that the average                    
          commission paid on the sale of a horse is 10 to 15 percent, and             
          that is what he would pay to persons other than Mr. Dahart.                 
          Petitioner testified that he would pay Mr. Dahart commissions as            
          high as 50 percent.  When petitioner sold La Quintina and Lucy in           
          Disguise, he paid Mr. Dahart a 50-percent commission on each                
          sale.  When petitioner sold Pro Gato8 for $47,500, he paid Mr.              
          Dahart a $19,000 or 40-percent commission, and he also paid                 




               8The contract was prepared on Arabian Crossings’ letterhead            
          that included both the names of petitioner and Alan Dahart.                 
          However, petitioner testified that he and Mr. Dahart did not                
          jointly own any horses.                                                     





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