It's that the breeder took the time/effort/money involved to find the best breeding dogs possible. It counts because it's part of the selection process. It's part of the reason people say you don't make a profit with ethical breeding, because of everything that goes in to titling dogs.
If a breeder is actually running a legitimate business, they're filing with the IRS. (in the US) The costs of entering trials, shows, travel expenses to those shows, hotel fares, camper hookups etc. would all be taken as an expense as well as stud fees, dog food, etc. etc. etc.
To show a profit their income must be higher than their expenses. It should be fairly easy for a breeder to show a loss at least on paper.
If they don't show a profit within a given number of years, or if they can't prove that they are at least making a legitimate attempt to make a profit their status is changed to hobbyist and then the tax laws change.
