What does owning horses have anything to do with taxes?

Question

I'm a tax accounting student. There's this one part in the chapter business and hobbies that I find odd:

"An activity (that does not involve horses) is profit-seeking if it shows a profit in at least 3 of any 5 consecutive years ending with the taxable year in question."

Can someone help me out deciphering this text? It doesn't explain it further in the book. What's up with the horses? Why not cows or sheep?

To WayneZ: If people who are in the business of raising and/or selling horses can prove that they can continually have losses, then shouldn't their activity be classified as a hobby instead?

Answer 1

For whatever reason, the IRS has been pretty lenient on the 3 out of 5 year profit rule when it comes to horses. Taypayers have been able to prove that it is common to lose money on horses more often than the IRS would like but still have a profit motive.

Answer 2

taxes ~ texas

???? ~ I don't know