Robert A. and Sheila D. Routon - Page 2

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          relating to 1994.  The issues for decision are whether                      
          petitioners are:  (1) Entitled to certain deductions relating to            
          their horse training and breeding activities, and (2) liable for            
          a section 6651(a) addition to tax for 1994.                                 
                                  FINDINGS OF FACT                                    
               Petitioners, husband and wife, resided in Somerset,                    
          California, at the time their petition was filed.                           
               At all relevant times, Mrs. Routon has been a                          
          schoolteacher.  Mr. Routon worked on his grandfather’s farm as a            
          youth, majored in zoology in college, and, after college, worked            
          as a veterinarian’s assistant.  He created two successful                   
          businesses:  a newspaper distributorship that he sold in 1976;              
          and American Leak Detection (ALD), a water leak detection                   
          business.  Both businesses operated profitably without a written            
          business plan.  In 1994 and 1995, respectively, Mr. Routon earned           
          $109,470 and $145,028 from ALD, and Mrs. Routon earned teaching             
          salaries of $41,751 and $43,575.                                            
               In 1985, petitioners established Ascension Arabians                    
          (Ascension), a horse breeding operation.  Petitioners believed              
          Ascension would provide substantial income in their retirement              
          years.  They maintained their full-time jobs, began devoting 35             

          all Rule references are to the Tax Court Rules of Practice and              

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