Strickland v. Commissioner ( 2000 )

T.C. Memo. 2000-309
UNITED STATES TAX COURT
RODERICK P. STRICKLAND AND LINDA G. STRICKLAND, Petitioners
v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2241-99. Filed September 28, 2000.
F. Pen Cosby, for petitioners.
Timothy A. Lohrstorfer, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COLVIN, Judge: Respondent determined deficiencies in
petitioners’ Federal income tax of $13,398 for 1995 and $10,687
for 1996.
Petitioners began to breed horses in 1993 and began to board
horses in 1995. The sole issue for decision is whether
petitioners operated their horse breeding and boarding activity
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(horse activity) for profit under section 183 in 1995 and 1996.
We hold that they did.
Section references are to the Internal Revenue Code in
effect during the years in issue. Rule references are to the Tax
Court Rules of Practice and Procedure. References to petitioner
are to Linda Strickland.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
A. Petitioners
Petitioners lived in Morgantown, Indiana, when they filed
their petition.
1. Linda Strickland
Petitioner was raised on a farm in Morgan County, Indiana,
where her family bred and boarded horses. Her father gave her a
horse when she was about 8 years old. She cared for that horse
and showed it in the local 4-H club and saddle club shows. She
trained registered Appaloosa horses for neighbors when she was a
teenager around the early 1960's.
Petitioner bought a registered quarter horse mare in 1969
when she was about 23 years old. Petitioner bred a few quarter
horse mares to a stallion she owned in the early 1970's. She
raised, showed, and sold a few foals around that time. She
competed at several horse shows in Indiana and nearby States.
Petitioner is the mother of Scott Waltz and Amy Stenger.
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She retired from Eli Lilly & Co. (Eli Lilly) in 1993.
2. Amy Stenger
Amy Stenger began to ride horses when she was 3 and show
horses when she was 5. She won many awards at local, State, and
national shows, including the All American Quarter Horse
Congress. She also won awards at the Indiana State Fair and
National Quarter Pony Association.
Amy Stenger began to train horses when she was 13. When she
was 16, she raised, trained, and sold a weanling filly that she
had been given. She broke and trained the first mare that
petitioners bought in 1993.
3. Mr. Strickland
Roderick Strickland (Mr. Strickland) grew up on a farm in
North Carolina, where he took tobacco from the field to the barn
with a mule and a sled. He rode mules and ponies when he was a
young adult (in the early 1960's) and rode a horse owned by his
father-in-law. He received a bachelor of science degree in crop
science business from North Carolina State University in 1960.
His first contact with quarter horses was in 1987 when he and
petitioner began dating.
All of Mr. Strickland’s work experience relates to
agriculture. His employers included North Carolina State
University, Ralston Purina, and Dow Elanco. He was employed as a
research assistant, sales associate, marketing associate,
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district sales manager, worldwide manager, national accounts
manager, product manager, national sales manager, and key account
executive. He developed business plans, annual budgets, annual
sales forecasts, and 5-year forecasts, and plans for introducing
and marketing new products. Mr. Strickland retired from Dow
Elanco on December 31, 1998.
4. Petitioners’ Income From Sources Other Than Their Horse
and Farm Activity
Petitioner received wages or other compensation from Eli
Lilly and Mr. Strickland received wages from Dow Elanco and Eli
Lilly from 1992 to 1996 as follows:
Year Mr. Strickland Petitioner Total
1992 $114,599 $42,378 $156,977
1993 125,947 94,483 220,430
1994 137,447 5,944 143,391
1995 200,882 5,094 205,976
1996 127,133 127,133
Petitioners had other income as follows in those years:
Year Dividends Interest Rent Total
1992 $6,659 $2,142 $250 $9,051
1993 7,178 1,863 441 9,482
1994 7,429 2,484 9,913
1995 8,372 3,205 1,396 12,973
1996 7,626 1,836 9,462
B. Petitioners’ Farm
Petitioner bought a farm in 1972 because she wanted to raise
and train horses. Petitioner paid the following for land:
Cost
Land Purchase date Cost per acre
30 acres July 20, 1972 $15,000 $500
20 acres July 17, 1978 16,000 800
20 acres April 1, 1980 20,000 1,000
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Petitioner’s home was on the land she bought in 1972.
Petitioner had horses on her farm while she raised her children.
She and her children enjoyed riding and caring for the horses.
Petitioner divorced in 1982 and became financially unable to show
or breed horses.
Petitioners married on July 21, 1988. At that time the land
contained one old barn. There were also about 10 acres of
cropland. Petitioner sold her home and about 1 acre of land in
1988. Petitioners built their present home on about 10 acres on
the farm before 1990. Petitioners bought about 21 acres
adjoining their property on March 20, 1995, for $2,000 per acre.
Petitioners cleared about 5 of the 21 acres to use as pasture.
In 1996, 50 of petitioners’ 88 acres were woodland, 21 acres were
cropland, 5 acres were pasture, and 10 acres were farmstead.
C. Petitioners’ Horse Breeding and Boarding Activity
1. Petitioners’ Use of the Land and Business Plan
Petitioners decided not to raise cattle because they neither
liked nor had any experience with cattle. Since around 1992,
they have sharecropped the 21 acres of tillable land with a local
farmer who grows tobacco.
Petitioners began in 1993 to breed, show, and sell quarter
horses. Petitioner was very familiar with them; people were
moving into their area and the number of horses was growing
rapidly; and they had some facilities and enough acreage to
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support the activity.
Petitioners enlarged their old barn, built a new barn, and
added stalls, wash racks, an indoor arena, and an office. Mr.
Strickland did much of the work. Petitioners asked their
certified public accountant how to set up their records. They
asked successful breeders about the type of horses to acquire for
their horse activity. They considered acquiring a stallion, but
owning a stallion would require them to modify their facilities
to do so. Petitioner ran the daily operations of their horse
activity. They intended to promote their activity by being
successful at horse shows. Petitioners did not have a written
business plan.
2. Horses That Petitioners Acquired, Bred, and Sold
Petitioners owned 1 horse at the end of 1992, 4 at the end
of 1993, 5 at the end of 1994, 11 at the end of 1995, and 12 at
the end of 1996. Petitioners bought, foaled, and sold horses as
follows:
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Year
Foaled
or Year Sale
Horse Sex bought Cost Sold Price
Tequila Twist gelding 1979 foal
Double A Son
Dee Sox gelding 1993 $1,000 1996 $3,800
Colorful
Conclusion mare 1993 2,000
Miss Magical
Colors mare 1993 3,500 1994 Died
GS Itsstormy mare 1994 2,625
Alpine Flowers mare 1994 500
(daughter of Title Nine)
Double A Doc’s
Anna mare 1995 foal
(daughter of GS Itsstormy)
Babes Little
Luck mare 1995 4,000
My T Prestigious mare 1995 5,000
Tenders Lopen gelding 1995 7,000
Title Nine mare 1995 1,500
Title Ten gelding 1995 500 1996 2,500
O So Classical mare 1996 foal
(daughter of Colorful Conclusion)
Shelby
Prestigious mare 1996 foal
(foal of Alpine Flowers)
Scotch Time Lady mare 1996 3,200
Tequila Twist was a grand champion and won his color class
in 1980. He also won the futurity, a major American Paint Horse
Association show in 1980. He was grand champion at least 13
times. Amy Stenger showed Tequila Twist in 1996.
Petitioners campaigned Colorful Conclusion in 1995.
Colorful Conclusion received at least 32 awards, including
reserve national champion and grand champion.
Amy Stenger showed Tenders Lopen 15 to 20 times in 1996.
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3. Operation of the Horse Activity
Petitioner worked full time on the horse activity in 1995
and 1996. Petitioners, their employees, or petitioner’s children
cleaned stalls every day in the summers of 1995 and 1996 and at
least every other day in the other months. They fed and watered
each horse twice each day and turned horses out every day. They
usually trained horses each day. The work usually took two
people all day to do. Petitioners paid Amy Stenger $5 an hour to
clean stalls in 1995 and 1996. These payments totaled $840 in
1995.
Petitioners maintained the barn, pastures, fences, arenas,
and equipment. They made many of the improvements themselves to
save money. Mr. Strickland did most of the fencing and
renovation of the barns. He built stables and stalls and
installed rubber mats and automatic waterers in their barn.
Petitioner administered antibiotics, pain killers,
tranquilizers, rhino shots, bandages, topical ointments, and hoof
medications. She assisted her mares with foaling. She first
taught horses to lead by halter, to stand tied, to be handled,
clipped, bathed, and loaded in a trailer. She taught yearlings
to work with a bit, lunge (run in a circle), respond to voice
commands, walk, trot, canter, rove, and reverse. She prepared
them for a saddle and rode them for the first time in the fall of
their yearling year. Petitioner used a slow and very involved
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training process because she believed it was it was better than
other methods, and it was cheaper than using a horse trainer.
Petitioner also sent horses to trainers for additional training.
Petitioners advertised individual horses for sale in a local
newspaper. They did not insure horses they foaled or any horse
worth less than $20,000.
4. Petitioners’ Boarding and Leasing Activity
Petitioners decided to board horses beginning in December
1995 to help generate more income. Based on the cost of feed,
hay, sawdust, labor to clean stalls, electricity, and insurance,
they concluded that it would cost about $95 per month to board a
horse for a customer. They hired an attorney to write a form
contract and release of liability form to use for boarding
horses. They had the forms printed.
Petitioners boarded two horses in January and February 1996,
three in March, six in April, four in May, five from June to
August, six in September, five in October, seven in November, and
four in December. They obtained customers through referrals.
Petitioners retained an attorney to write a horse lease
agreement form which they had printed. Petitioners leased
Tequila Twist and Babes Little Luck to local 4-H Clubs for $175
per month each from December 1, 1995, to October 31, 1996. The
4-H Club members rode the leased horses on petitioners’ property.
As a favor to the lessees, petitioners sometimes hauled the
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leased horses to shows to which petitioners were taking other
horses. Petitioners discontinued leasing horses because they
believed the risk of liability offset the potential profit.
Petitioner gave (and sometimes charged for) riding lessons.
5. Petitioners’ Records and Bank Accounts
Petitioners kept income, expense, breeding, foaling, health,
and farrier (horse shoe) records for their horses on their
personal computer. Petitioners could prepare reports on their
computer of their horse-related income and expenses for 1995 and
1996, including reports for each horse.
Petitioners used one checking account for their personal,
farm, and horse-related activities from 1993 to 1995. They
opened a separate checking account for their horse activity
(horse account) on February 2, 1996. They deposited $16,952.60
in the horse account from February 2, 1996, to January 3, 1997.
In 1996, petitioners paid about $14,000 of their horse expenses
from their horse account and the rest from their personal
account.
6. Petitioners’ Training and Expertise
Petitioners read magazines, reviewed sire lists, viewed
videotapes, attended seminars, and spoke with quarter horse
industry experts. They sought horse breeding advice from Edward
M. Alderson (Alderson) and other horse breeders. Alderson had
two stallions on his farm where he grows alfalfa and breeds
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quarter horses. He sold some quarter horses to petitioners.
Steven Mobley (Mobley), a certified public accountant, prepared
petitioners’ income tax returns for 1993 through 1996. Mobley
gave petitioners tax advice for their horse activity. Alderson
and Mobley did not advise petitioners how to make their horse
activity profitable.
7. Petitioners’ Personal Pleasure From Their Horse
Activity
Petitioner gets personal pleasure from raising, training,
and showing horses. She enjoys going to horse shows and seeing
her horses do well. Mr. Strickland gets pleasure from
petitioner’s and Amy Stenger’s success with horses and likes to
work with the foals.
D. Horse Income and Expenses
Petitioners reported the following on their Schedules C
(Profit and Loss) for their horse activity:
Income
1993 1994 1995 1996 Total
Sale of foals $1,700 $1,700
Boarding 400 $10,995 11,395
Show winnings $250 276 526
Riding lessons 160 60 220
Horse leasing 175 2,280 2,455
Gross income 0 410 2,611 13,275 16,296
Expenses Total
Depreciation 1,883 7,190 12,790 14,036 35,899
Other 7,180 12,887 20,819 29,189 70,075
Total expenses 9,063 20,077 33,609 43,225 105,974
Net loss (9,063)(19,667) (30,998) (29,950) (89,678)
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OPINION
A. Whether Petitioners Operated Their Horse Activity for Profit
The parties dispute whether petitioners operated their horse
breeding and boarding activity for profit in 1995 and 1996.1 In
deciding whether petitioners operated their horse activity for
profit, we consider the following nine factors: (1) The manner
in which the taxpayer carried on the activity; (2) the expertise
of the taxpayer or his or her advisers; (3) the time and effort
expended by the taxpayer in carrying on the activity; (4) the
expectation that the assets used in the activity may appreciate
in value; (5) the success of the taxpayer in carrying on other
similar or dissimilar activities; (6) the taxpayer's history of
income or loss with respect to the activity; (7) the amount of
occasional profits, if any, which are earned; (8) the financial
status of the taxpayer; and (9) whether elements of personal
pleasure or recreation are involved. See sec. 1.183-2(b), Income
Tax Regs. No single factor controls. See Osteen v.
Commissioner, 62 F.3d 356, 358 (11th Cir. 1995), affg. in part
and revg. on other issues T.C. Memo. 1993-519; Brannen v.
Commissioner, 722 F.2d 695, 704 (11th Cir. 1984), affg. 78 T.C.
471 (1982); sec. 1.183-2(b), Income Tax Regs.
1
Respondent contends that petitioners’ farming and horse
breeding were separate activities. Petitioners do not respond to
respondent’s contention. Thus, we treat them as separate
activities.
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Each party cited events that occurred after 1996. We do not
consider those events (other than those related to trial
preparation) because those events do not show whether petitioners
had a profit objective during the years in issue. See Lundquist
v. Commissioner, T.C. Memo. 1999-83 n.1, affd. without published
opinion 211 F.3d 600 (11th Cir. 2000); Estate of Brockenbrough v.
Commissioner, T.C. Memo. 1998-454; Gustafson's Dairy, Inc. v.
Commissioner, T.C. Memo. 1997-519; Choate Constr. Co. v.
Commissioner, T.C. Memo. 1997-495; cf. Estate of Hutchinson v.
Commissioner, T.C. Memo. 1984-55 (events occurring after the date
in issue are relevant only if they shed light on the taxpayer's
state of mind on the date in issue), affd. 765 F.2d 665 (7th Cir.
1985).
B. Applying the Factors
1. Manner in Which the Taxpayer Conducts the Activity
Maintaining complete and accurate books and records,
conducting the activity in a manner substantially like comparable
businesses which are profitable, and making changes in operations
to improve profitability suggest that a taxpayer conducted an
activity for profit. See Engdahl v. Commissioner, 72 T.C. 659,
666-667 (1979); sec. 1.183-2(b)(1), Income Tax Regs.
a. Books and Records, Bank Accounts, and Business
Plan
Respondent contends that petitioners’ books and records were
not adequate because they did not keep them for each horse.
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Respondent points out that petitioners did not have a detailed
written budget or written business plan and that they paid most
of the expenses for their horse activity with personal funds.
Petitioners kept complete and accurate records on their
personal computer. They could obtain reports from their computer
including reports for each horse. They could identify the amount
of their horse income and expenses in their personal checking
account. See Engdahl v. Commissioner, supra at 667 (one checking
account for horse activity, a medical practice, and personal
matters).
Respondent points out that petitioners’ horse activity books
and records were very different from those in the corporation
which employed Mr. Strickland. We think those differences are
understandable, among other reasons, because the horse activity
was in the early stages during the years in issue.
It is reasonable for a new activity, with very little cash
flow or income, to use personal funds. Petitioners had a
business plan and pursued it consistently, even though it was not
written. See Phillips v. Commissioner, T.C. Memo. 1997-128
(written financial plan not required for 32-horse farm where
business plan evidenced by action). Petitioners conducted their
horse activity in a businesslike manner. Mr. Strickland built as
much of the facilities as possible, and petitioner provided
medical and training services to reduce their expenses. They
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increased their number of horses from one in 1993 to 11 in 1996,
and boarded other people’s horses.
b. Investigating How To Conduct the Activity
Respondent contends that petitioners did not investigate the
profit potential of their horse activity before they started it.
We disagree. Petitioner has been involved with horses all of her
life, and she knows the associated costs. Petitioners knew that
interest in horses was rapidly growing in their area. Mr.
Strickland had an extensive business background and was familiar
with horses. We believe that petitioners understood the profit
potential. A taxpayer need not conduct a formal marketing study
to have a profit objective. See Burger v. Commissioner, 809 F.2d
355, 359 n.6 (7th Cir. 1987), affg. T.C. Memo. 1985-523; Engdahl
v. Commissioner, supra at 668.
c. Amy Stenger’s Success at Showing Horses
Respondent contends that petitioners owned ponies when Amy
Stenger was young and horses when she was older. Thus,
respondent contends that petitioners were more interested in
providing horses for Amy than in making a profit. We disagree.
Petitioners started their horse activity in 1993 with Tequila
Twist and Double A Son Dee Sox, neither of which is a pony. They
bought two mares in 1993, one of which was a quarter pony.
Respondent contends that this case is like Budin v.
Commissioner, T.C. Memo. 1994-185 (taxpayers were more interested
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in their child’s horse show activity than in making a profit).
We disagree. The taxpayers in that case had no experience with
horses before they began their horse activity. The taxpayers’
son began competing 3 years before they began their horse
activity. He showed great potential as a rider the year before
they started the activity.
Respondent contends that petitioners’ failure to own a
stallion was inconsistent with their business plan and restricted
their ability to make a profit. We disagree. Petitioners did
not own a stallion because that would require them to pay to
acquire and maintain the stallion and to modify their facilities.
Respondent contends that petitioners’ mares were not good
enough to support a profitable breeding program. It was too
early to tell whether respondent’s speculation is correct in 1995
and 1996, the third and fourth years of petitioners’ horse
breeding activity.
Respondent contends that petitioners did not advertise their
horse activity in a businesslike manner. We disagree.
Petitioners advertised horses for sale in a local newspaper.
They also showed their horses. See Engdahl v. Commissioner, 72
T.C. 662-663, 667 (“Horse shows are the best form of
advertising for American saddle-bred horses.”); Golanty v.
Commissioner, 72 T.C. 411, 430-431 (1979) (taxpayers’ failure to
show horses indicated that taxpayers were not engaged in activity
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for profit), affd. 647 F.2d 170 (9th Cir. 1981).
Respondent contends that petitioners’ failure to insure
horses they had foaled and horses worth less than $20,000 shows
that they lacked a profit objective. Respondent also contends
that petitioners’ failure to charge fees for all riding lessons
and hauling leased horses shows they lacked a profit objective.
We decline to second-guess petitioners on these points.
d. Changing Their Operations
Boarding horses allowed petitioners to derive income from
their facilities before they filled them with their own horses.
Respondent concedes that petitioners’ boarding operation is a
change contemplated by section 1.183-2(b)(1), Income Tax Regs.,
but points out that petitioners’ decision to board horses did not
prevent losses. However, petitioners’ losses would have been
larger if they had not boarded horses. Petitioners also leased
horses in 1995 and 1996.
e. Conclusion
Petitioners operated their horse activity in a serious and
organized manner. They considered how best to use their land,
the growing interest in horses in their area, and their personal
expertise with horses in deciding to start the horse activity.
They kept accurate records of their horse activity’s finances and
the status of their horses. They improved and expanded their
facilities and boarded horses while beginning to acquire quality
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broodmares. They tried to keep costs as low as possible. This
factor favors petitioners.
2. The Expertise of the Taxpayers or Their Advisers
Efforts to gain experience, a willingness to follow expert
advice, and preparation for an activity by extensive study of its
practices may indicate that a taxpayer has a profit motive. See
sec. 1.183-2(b)(2), Income Tax Regs.
Respondent contends that petitioners did not seek or have
the economic expertise necessary to operate the horse activity
profitably. Respondent points out that petitioners did not show
a profit from 1993 to 1996, and that none of the material that
petitioners reviewed or experts with whom they talked addressed
how to make a profit or minimize losses. Petitioner knew a lot
about breeding, raising, training, boarding, buying, and selling
of horses and the costs associated with those actions. Mr.
Strickland had extensive business experience. Petitioners read
books and periodicals, viewed videotapes, attended seminars, and
consulted with experts. We believe that petitioners had the
expertise to conduct a profitable horse activity. This factor
favors petitioners.
3. Taxpayer's Time and Effort
The fact that a taxpayer devotes much time and effort to
conducting an activity may indicate that he or she has a profit
objective. See sec. 1.183-2(b)(3), Income Tax Regs.
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Respondent contends that petitioner’s time log for 1996
shows that she did not spend much time on the horse activity. We
disagree. The time log for 1996 corroborates petitioners’ and
Amy Stenger’s testimony about the time and effort they spent on
the horse activity. This factor favors petitioners.
4. Expectation That Property Used in the Activity Would
Appreciate in Value
A taxpayer may intend to make an overall profit when he or
she expects appreciation in the value of assets used in the
activity to exceed losses. See sec. 1.183-2(b)(4), Income Tax
Regs. There is an overall profit if net earnings and
appreciation exceed losses from earlier years. See Bessenyey v.
Commissioner, 45 T.C. 261, 274 (1965), affd. 379 F.2d 252 (2d
Cir. 1967).
Respondent contends that petitioners have not shown that the
appreciation in assets by 1996 exceed their losses. Respondent’s
contention improperly focuses on actual rather than expected
appreciation. See sec. 1.183-2(b)(4), Income Tax Regs.
Petitioners contend that they expected appreciation in the value
of their horses to more than offset their net losses. The
evidence upon which petitioners rely is inconclusive. This
factor is neutral.
5. Taxpayer's Success in Other Activities
The fact that a taxpayer has previously and profitably
engaged in similar activities may show that the taxpayer has a
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profit objective. See sec. 1.183-2(b)(5), Income Tax Regs.
Petitioners have been successful in other activities, but
none that are similar to their horse activity. This factor is
neutral.
6. Taxpayer's History of Income or Losses
A history of substantial losses may indicate that the
taxpayer did not conduct the activity for profit. See Golanty v.
Commissioner, 72 T.C. 427; sec. 1.183-2(b)(6), Income Tax
Regs. Losses during the initial stage of an activity do not
necessarily indicate that it is not conducted for profit. See
Engdahl v. Commissioner, 72 T.C. 669; sec. 1.183-2(b)(6),
Income Tax Regs. The startup phase of a horse-breeding activity
may be 5 to 10 years for standardbred horses. See Engdahl v.
Commissioner, supra. This factor is neutral because petitioners
were in the third and fourth year of their activity in 1995 and
1996.
7. Amount of Occasional Profits, If Any
The amount of any occasional profits the taxpayer earned
from the activity may show that the taxpayer had a profit motive.
See sec. 1.183-2(b)(7), Income Tax Regs. Petitioners did not
have a profit from 1993 to 1996. However, this is not
unreasonable during the startup years of petitioners’ activity.
Losses sustained because of unforeseen or fortuitous
circumstances beyond the control of the taxpayer do not indicate
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that the activity was not engaged in for profit. See sec. 1.183-
2(b)(6), Income Tax Regs. Petitioners’ mare, Miss Magical
Colors, and her foal died in 1994. Respondent contends that
their deaths were insignificant. We disagree. Miss Magical
Colors’ death represented a loss of 25 percent of petitioners’
breeding capability. This factor is neutral.
8. Financial Status of the Taxpayer
The receipt of a substantial amount of income from sources
other than the activity may indicate that the taxpayer does not
intend to conduct the activity for profit. See sec. 1.183-
2(b)(8), Income Tax Regs. Respondent contends that this factor
favors respondent because petitioners had a substantial amount of
income from sources other than the horse activity in the years in
issue. We disagree.
Petitioners’ nonfarm income decreased from $218,949 in 1995
to $135,594 in 1996. Petitioner retired in 1993, and Mr.
Strickland was scheduled to retire in 1998. Petitioners believed
that their annual income from sources other than their horse
activity would decrease. This suggests they had no long-term
need to shelter income after the startup phase. This factor is
neutral.
9. Elements of Personal Pleasure
The presence of recreational or personal motives in
conducting an activity may indicate that the taxpayer is not
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conducting the activity for profit. See sec. 1.183-2(b)(9),
Income Tax Regs. However, a taxpayer's enjoyment of an activity
does not show that the taxpayer lacks a profit objective if the
activity is conducted for profit as shown by other factors. See
Jackson v. Commissioner, 59 T.C. 312, 317 (1972); sec. 1.183-
2(b)(9), Income Tax Regs. Petitioners enjoyed breeding and
showing horses, but we doubt that petitioners’ motive for
boarding and leasing their horses to others was to derive
personal pleasure. This factor is neutral.
C. Conclusion
Petitioners operated their horse activity in a business-like
manner. They had the expertise to conduct a profitable horse
activity. They spent a substantial amount time on their horse
activity, including taking care of other people’s horses. We
conclude that petitioners engaged in their horse activity for
profit in 1995 and 1996.
To reflect the foregoing,
Decision will be entered
for petitioners.