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Petitioners also argue that the stallion Sunny Feet was
purchased at no cost but was one of the most successful stallions
in Arizona, producing 10-percent stakes winners and over $100,000
in futurity stakes races. Petitioner stated that the stallion’s
untimely death had compromised his chances of making a profit
from breeding fees and awards. No credible evidence was offered
by petitioners with regard to Sunny Feet to substantiate their
claims.
Petitioner considers himself an expert in the thoroughbred
industry and believes that, as a physician with a background in
statistical analysis, he can produce a higher quality
thoroughbred than other Arizona breeders. A taxpayer’s
expertise, research, and study of an activity, as well as his
consultation with experts, may be indicative of a profit motive.
Sec. 1.183-2(b)(2), Income Tax Regs. In the 1995 supplement to
the business plan, petitioner stressed that the focus of Caduceus
Thoroughbreds would be on nutrition and training. Although
petitioner named several key advisers to the breeding and racing
operation in the 1987 and 1995 business plans, he did not present
any further evidence of their expertise in the industry or that
he actually relied on such experts. Petitioner has no formal
training in equine science and has not shown that he performed
any research or analysis on the profitability of his operations.
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