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Respondent points out that petitioners did not have a detailed
written budget or written business plan and that they paid most
of the expenses for their horse activity with personal funds.
Petitioners kept complete and accurate records on their
personal computer. They could obtain reports from their computer
including reports for each horse. They could identify the amount
of their horse income and expenses in their personal checking
account. See Engdahl v. Commissioner, supra at 667 (one checking
account for horse activity, a medical practice, and personal
matters).
Respondent points out that petitioners’ horse activity books
and records were very different from those in the corporation
which employed Mr. Strickland. We think those differences are
understandable, among other reasons, because the horse activity
was in the early stages during the years in issue.
It is reasonable for a new activity, with very little cash
flow or income, to use personal funds. Petitioners had a
business plan and pursued it consistently, even though it was not
written. See Phillips v. Commissioner, T.C. Memo. 1997-128
(written financial plan not required for 32-horse farm where
business plan evidenced by action). Petitioners conducted their
horse activity in a businesslike manner. Mr. Strickland built as
much of the facilities as possible, and petitioner provided
medical and training services to reduce their expenses. They
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