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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
1(...continued)
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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