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leased horses to shows to which petitioners were taking other
horses. Petitioners discontinued leasing horses because they
believed the risk of liability offset the potential profit.
Petitioner gave (and sometimes charged for) riding lessons.
5. Petitioners’ Records and Bank Accounts
Petitioners kept income, expense, breeding, foaling, health,
and farrier (horse shoe) records for their horses on their
personal computer. Petitioners could prepare reports on their
computer of their horse-related income and expenses for 1995 and
1996, including reports for each horse.
Petitioners used one checking account for their personal,
farm, and horse-related activities from 1993 to 1995. They
opened a separate checking account for their horse activity
(horse account) on February 2, 1996. They deposited $16,952.60
in the horse account from February 2, 1996, to January 3, 1997.
In 1996, petitioners paid about $14,000 of their horse expenses
from their horse account and the rest from their personal
account.
6. Petitioners’ Training and Expertise
Petitioners read magazines, reviewed sire lists, viewed
videotapes, attended seminars, and spoke with quarter horse
industry experts. They sought horse breeding advice from Edward
M. Alderson (Alderson) and other horse breeders. Alderson had
two stallions on his farm where he grows alfalfa and breeds
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