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for profit), affd. 647 F.2d 170 (9th Cir. 1981).
Respondent contends that petitioners’ failure to insure
horses they had foaled and horses worth less than $20,000 shows
that they lacked a profit objective. Respondent also contends
that petitioners’ failure to charge fees for all riding lessons
and hauling leased horses shows they lacked a profit objective.
We decline to second-guess petitioners on these points.
d. Changing Their Operations
Boarding horses allowed petitioners to derive income from
their facilities before they filled them with their own horses.
Respondent concedes that petitioners’ boarding operation is a
change contemplated by section 1.183-2(b)(1), Income Tax Regs.,
but points out that petitioners’ decision to board horses did not
prevent losses. However, petitioners’ losses would have been
larger if they had not boarded horses. Petitioners also leased
horses in 1995 and 1996.
e. Conclusion
Petitioners operated their horse activity in a serious and
organized manner. They considered how best to use their land,
the growing interest in horses in their area, and their personal
expertise with horses in deciding to start the horse activity.
They kept accurate records of their horse activity’s finances and
the status of their horses. They improved and expanded their
facilities and boarded horses while beginning to acquire quality
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