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Petitioner read various horse industry publications
including Blood Horse and Thoroughbred Times. In addition,
petitioner daily checked race results in newspapers.
III. New York Breeder’s Program
New York State offers an incentive program to induce
thoroughbred horse owners to conduct their breeding and racing
activities in New York. Under the program, owners of winning
horses receive the full purse due each winning horse owner. In
addition, the owners of the winner’s parents, if the winner was
foaled in New York, receive 20 percent of the winner’s race
winnings.
Petitioner has participated in the program since she began
her thoroughbred horse breeding and racing activities. During
that time, the program’s qualification restrictions eased.
Breeders were allowed to engage out-of-State thoroughbreds with
New York thoroughbreds and still qualify for the breeder’s 20-
percent payout. Subsequently, petitioner bred some of her mares
with various out-of-State stallions.
IV. Petitioner’s 1996 Tax Return
Petitioner timely filed her 1996 tax return in which she
deducted expenses relating to her thoroughbred horse breeding and
racing activities. Respondent issued a notice of deficiency to
petitioner for 1996 in which respondent disallowed the deductions
because petitioner did not engage in her thoroughbred horse
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