Judith A. Sanders-Castro - Page 5

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          in 2000 and did not report any gain as income on her Schedule C             
          for that year.                                                              
               Petitioner bred Sarah Air with Jr’s Shado, the same stallion           
          that produced Skippy and King.  Jr’s Shado was owned by T.L.                
          Seville (Mr. Seville).                                                      
               Sarah Air foaled Saras Chula Shado (Chula) in May 1999.                
          Petitioner bred Sarah Air another time with Jr’s Shado,                     
          unsuccessfully, in 1999.  Breeding the same pair still another              
          time yielded a horse named Star in 2001.  Chula was sold in 2002            
          in exchange for $1,250 and training for Star valued at $1,000.              
          Both Star and Sarah Air were later given away to a friend for               
          free.4                                                                      
               In 1999, petitioner purchased another mare, Flash,                     
          discovered by Ms. Pruitt at a rodeo.  The idea was that                     
          petitioner would buy Flash and pay for training while Ms. Pruitt            
          would maintain the horse, and the two would split the profits               
          from Flash’s eventual sale.5  Petitioner purchased Flash for                
          $3,600, had her trained for about 6 months (at a cost of                    


               3(...continued)                                                        
          Jan. 23, 1999.                                                              
               4  Petitioner testified that, at the time of trial, the                
          transfer of the horses was not yet complete but that she was                
          incurring no further related expenses and that her friend had               
          “assumed ownership” of the horses.                                          
               5  Despite this 50-percent partnership arrangement,                    
          petitioner claimed 100 percent of the depreciation deductions for           
          this horse on her 1999 and 2001 tax returns.                                




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