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increased their number of horses from one in 1993 to 11 in 1996,
and boarded other people’s horses.
b. Investigating How To Conduct the Activity
Respondent contends that petitioners did not investigate the
profit potential of their horse activity before they started it.
We disagree. Petitioner has been involved with horses all of her
life, and she knows the associated costs. Petitioners knew that
interest in horses was rapidly growing in their area. Mr.
Strickland had an extensive business background and was familiar
with horses. We believe that petitioners understood the profit
potential. A taxpayer need not conduct a formal marketing study
to have a profit objective. See Burger v. Commissioner, 809 F.2d
355, 359 n.6 (7th Cir. 1987), affg. T.C. Memo. 1985-523; Engdahl
v. Commissioner, supra at 668.
c. Amy Stenger’s Success at Showing Horses
Respondent contends that petitioners owned ponies when Amy
Stenger was young and horses when she was older. Thus,
respondent contends that petitioners were more interested in
providing horses for Amy than in making a profit. We disagree.
Petitioners started their horse activity in 1993 with Tequila
Twist and Double A Son Dee Sox, neither of which is a pony. They
bought two mares in 1993, one of which was a quarter pony.
Respondent contends that this case is like Budin v.
Commissioner, T.C. Memo. 1994-185 (taxpayers were more interested
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