Robert A. and Sheila D. Routon - Page 4

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          improve their chances of turning a profit (i.e., selling inferior           
          horse stock in 1989, reinvesting the horse sale proceeds in                 
          national quality stock, investigating and implementing the use of           
          frozen semen, etc.).  During the years in issue, petitioners’               
          prospective horse sales failed because of injury to a horse and             
          misrepresentations made to petitioners.                                     
               Petitioners’ tax returns for 1994 and 1995 were prepared by            
          an enrolled agent, James G. Joelson, who acquiesced to the tax              
          treatment of their horse activity.  Petitioners’ 1994 return was            
          filed on October 30, 1995.  Respondent disallowed all of                    
          petitioners’ expenses relating to Ascension for 1994 and 1995,              
          contending that their horse activity was not engaged in for                 
          I.   Profit Objective                                                       
               Section 183 limits the deductions for an activity not                  
          engaged in for profit.  Sec. 183(b).  This case is appealable to            
          the Ninth Circuit Court of Appeals.  The primary purpose standard           
          has been followed by that circuit in determining whether the                
          requisite profit objective exists.  See Wolf v. Commissioner, 4             
          F.3d 709, 713 (9th Cir. 1993), affg. T.C. Memo. 1991-212 (holding           
          that profit must be the predominant, primary, or principal                  
          objective).  Petitioners bear the burden of proving the requisite           

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