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fencing, and pipe corrals. He formed a futurity named Hopes and
Dreams Futurity in the early 1980s3 and remains active in
promoting his horses at various rodeos and horse shows throughout
the nation.
Petitioner specifically testified that he has always been in
the horse business for profit, and that during the years in
issue, he split his time equally between his law practice and his
horse activity. Petitioner did not maintain a separate bank
account for his horse activity and did not keep an inventory
accounting of each individual horse. Petitioner testified that
he kept inventory as he claims most ranchers do--by simply
keeping track of “how much money you take in and how much money
you spend”. Petitioner suggested that on the basis of these
cashflows, he expects to profit from the sale of each horse once
it is fully trained. Furthermore, petitioner testified that most
3 Petitioner explained the Hopes and Dreams Futurity as
follows:
Hopes and Dreams takes – enrolls stallions in their
program of $1000 stud fee or less.
And they put that money in a pot, and Hopes and Dreams
takes a small percentage of it. Then the foals – if
that entices a mare owner to breed to these stallions
that are enrolled in Hopes and Dreams, and when they
breed to them, their foals, which are the offspring of
the mare, are then eligible for the futurity that they
run at two years of age.
Now, after about three or four years, the pot got pretty
big, and you’d pay out for the winner of the Hopes and
Dreams * * *
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