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in their child’s horse show activity than in making a profit).
We disagree. The taxpayers in that case had no experience with
horses before they began their horse activity. The taxpayers’
son began competing 3 years before they began their horse
activity. He showed great potential as a rider the year before
they started the activity.
Respondent contends that petitioners’ failure to own a
stallion was inconsistent with their business plan and restricted
their ability to make a profit. We disagree. Petitioners did
not own a stallion because that would require them to pay to
acquire and maintain the stallion and to modify their facilities.
Respondent contends that petitioners’ mares were not good
enough to support a profitable breeding program. It was too
early to tell whether respondent’s speculation is correct in 1995
and 1996, the third and fourth years of petitioners’ horse
breeding activity.
Respondent contends that petitioners did not advertise their
horse activity in a businesslike manner. We disagree.
Petitioners advertised horses for sale in a local newspaper.
They also showed their horses. See Engdahl v. Commissioner, 72
T.C. at 662-663, 667 (“Horse shows are the best form of
advertising for American saddle-bred horses.”); Golanty v.
Commissioner, 72 T.C. 411, 430-431 (1979) (taxpayers’ failure to
show horses indicated that taxpayers were not engaged in activity
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