J. Michael and Susan Reimer - Page 11




                                       - 10 -                                         
               Petitioners’ next business plan is entitled “Summer’ [sic]             
          End Farm 10 Year Plan Financials” (1990 business plan).  The 1990           
          business plan did not carry over the prior period’s “net                    
          cumulative” amount, thus starting from scratch.  Based upon the             
          1990 business plan, petitioners projected a net profit in 1992.             
               Petitioners testified that the business plans were written             
          within a year or two from the beginning of the time period                  
          covered in each plan.  Petitioners did not conduct an income or             
          expense summary based on actual amounts incurred or expended for            
          any given time period.  Petitioners stipulated that they did not            
          revise any of the above business plans or financial projections             
          after the plans were written.                                               
               Each plan also included an attached narrative summary of               
          what occurred in the prior period.                                          
               Petitioners printed business cards and brochures to promote            
          the horse breeding activity.  Petitioners also maintained a                 
          separate checking account for the horse breeding activity.                  
               Petitioners were members of various Arabian horse                      
          associations during the years in issue, including the                       
          International Arabian Horse Association (IAHA) and American Horse           
          Shows Association.                                                          
          E.   Petitioners’ Time and Effort                                           
               Petitioners divided the work responsibilities for their                
          horses.  Mrs. Reimer handled most of the labor and the horses’              







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