Moanikeala Jellinger and her husband, Samuel Keanini (the couple) (plaintiffs) built a kennel in Hawaii in 1982 and began breeding, selling, and showing poodles in national championships; grooming dogs; and sponsoring dogs in quarantine full-time. Jellinger worked exclusively in the dog business, and Keanini, a police officer, spent an average of 20 to 30 hours in the dog business a week. The couple regularly attended training sessions and seminars to improve their business and grooming skills, and they became the only nationally certified dog groomers in the state. The couple gained a national reputation as breeders of champion miniature poodles. Customers who purchased a poodle from the couple agreed in writing to give the couple a poodle from the customer’s first litter and to use the couple as groomers. The couple also integrated their quarantine business, in which they sponsored dogs undergoing the required 120 days of quarantine after entering Hawaii, with their grooming and breeding business by fostering relationships with the quarantining dogs’ owners. As the couple became more successful, they hired additional workers to help them run their business. Between 1982 and 1988, the couple deducted their losses associated with their dog business on their federal income-tax returns. Though the business did not become profitable until 1987, each year of that period saw increased income over the previous year. The Commissioner of Internal Revenue (the Commissioner) (defendant) determined that the couple did not engage in the dog-breeding operation for profit and disallowed their deduction of losses incurred in 1982 and 1983. The couple petitioned the United States Tax Court for a redetermination, arguing that they engaged in dog breeding for profit, in tandem with their grooming and quarantining business.