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startup phase). We previously have found that the startup phase
for an Arabian horse breeding business may be between 5 and 10
years. See Engdahl v. Commissioner, 72 T.C. at 669; see also
Phillips v. Commissioner, T.C. Memo. 1997-128 (“a period of 5 to
10 years for the startup phase of an Arabian breeding operation
is not unreasonable”).
Petitioner argues that this factor weighs in her favor.
According to petitioner, she has suffered numerous setbacks in
her horse activity including a depressed market in the Arabian
horse industry from 1992 to 1996, lack of space, a drop in the
value of her home, which she planned to sell to raise capital to
develop the Gavilan Hills property, stillborn foals, and mares
not conceiving. Taking into account these setbacks, petitioner
states, she was still in the startup phase of the horse activity
during the subject years. Petitioner also states that her losses
from the horse activity have diminished over the years.
We disagree with petitioner that this factor weighs in her
favor. First, as noted above, we find no credible evidence in
the record to support petitioner’s claim of a depressed market
from 1992 to 1996, a drop in the value of her home, or the
failure of bred mares to conceive. Nor do we believe that the
financial results of the horse activity are attributable to
petitioner’s claim of lack of space or the stillborn foal. The
horse activity has lost money in every year of its operation,
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