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and $619,611, respectively, in unrelated gross income. During the
same years, petitioners claimed $211,868, $162,454, and $187,951,
respectively, in Schedule F losses. Petitioners used these losses
to reduce their gross income by 37 percent for 1992, 19 percent for
1993, and 30 percent for 1994. These reductions led to substantial
tax savings.7
9. Elements of Personal Pleasure or Recreation
The existence of recreational elements in an activity may
indicate that the activity is not engaged in for profit; on the
other hand, where an activity lacks any appeal other than profit,
a profit motive may be indicated. See Hillman v. Commissioner,
supra; sec. 1.183-2(b)(9), Income Tax Regs.
Petitioners’ recreational objectives were a significant
component of their cattle-raising and deer operations. Petitioner
grew up on his parents’ cattle ranch, where he often enjoyed the
hunting of deer, a passion he was able to continue on his own
ranches. Moreover, petitioners entertained friends and families on
both ranches during holiday seasons and other special occasions.
7 Petitioners’ cattle-raising activities also enabled
them to reduce their State property taxes by as much as 90
percent. According to one of petitioners’ expert witnesses, this
tax benefit was available to taxpayers who made land “look like a
ranch” solely by placing “a few cows [on the property] whether it
is run profitably or not”.
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