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J.W. Venture was sold in 1986 and subsequently gelded in
1997. Jessica’s Melody was sold in 1994 for $2,500.
Petitioners, on December 15, 1994, entered into a lease
agreement with Jim and Jackie Gully to breed Ms. Bak and
Sassafras with two stallions of Mr. and Mrs. Gully’s choice. No
foals were born.
In 1993 petitioners’ “herd” consisted of four mares: Ms.
Bak, Sassafras, Tender Moment, and Jessica’s Melody. The ages of
these mares were 16, 13, 9, and 3 years, respectively. Jessica’s
Melody was sold in 1994 for $2,500. By the end of 1994,
petitioners only had three mares.
D. Petitioners’ Business Plans
In petitioners’ first business plan entitled “J-Mar Arabians
Est. 1971" (1971 business plan), petitioners stated their
objective as “long term profit ‘optimization’ through careful,
practical, well-planned program of investment in a quality stock
for breeding and sale, and to breed the perfect Arabian horse -
athletic elegance.”
Attached to their 1971 business plan was a 5-year plan
financial spreadsheet and summary for the period 1971 to 1976.
According to this plan, petitioners would yield an annual
positive cashflow starting in 1975, or year 5; however,
petitioners’ plan stated an overall net loss through 1976 of
$8,500. In 1976, the plan projected total assets worth $11,000.
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