Robert A. and Sheila D. Routon - Page 3

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          hours a week to Ascension’s activities, and regularly consulted             
          with Arabian horse experts relating to Ascension’s operations.              
               Mr. Routon kept Ascension’s books and records, purchased               
          insurance, attended seminars, and occasionally showed the horses            
          at expositions and competitions.  He immersed himself in the                
          Arabian horse industry, taking various leadership positions in              
          trade organizations and writing columns for industry magazines.             
          Mrs. Routon searched for suitable horse breeding and farming                
          properties and tended to the horses when Mr. Routon was                     
          unavailable.  Ascension’s horses were handled by a professional             
          trainer.  Expenses relating to Ascension and ALD were billed to,            
          and paid out of, the same account.  At the end of each year, Mr.            
          Routon would summarize the expenses relating to both businesses.            
          Mr. Routon promoted Ascension by conducting seminars; mailing               
          video tapes featuring their top stallion, Diamond Bask, to                  
          seminar attendees; advertising in trade magazines; and attending            
               Petitioners’ horses have substantial value.  Diamond Bask,             
          their top stallion, is worth $250,000.  Despite the quality of              
          their horses, petitioners’ sales and marketing endeavors were               
          ineffective.  From 1988 through the years in issue, Ascension’s             
          cumulative income and expenses were $15,575 and $531,964,                   
          respectively.  During this period, petitioners did not have a               
          profitable year but made several operational adjustments to                 

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Last modified: May 25, 2011