James C. Vallette and Arleen R. Vallette - Page 7

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          accurate records.  Id.  The fact that an individual adopts a                
          different method of operating or abandons unprofitable methods              
          with respect to operating his or her activity may suggest a                 
          desire to earn a profit.  Id.                                               
               Petitioners have failed to persuade us that they conducted             
          their breeding activity in a businesslike manner.  They rely                
          merely on their subjective expressions of intent, as well as the            
          limited testimony of family members.  Petitioners did not produce           
          any of their activity’s records at trial.  They did not establish           
          that they used "cost accounting techniques that, 'at a minimum,             
          provide the entrepreneur with the information he [or she]                   
          requires to make informed business decisions."  Burger v.                   
          Commissioner, 809 F.2d 355, 359 (7th Cir. 1987) (quoting Burger             
          v. Commissioner, T.C. Memo. 1985-523), affg. T.C. Memo. 1985-523.           
          They did not demonstrate that they monitored expenses or assessed           
          their activity's profitability.  They did not establish that they           
          maintained a budget for their activity, or that they advertized             
          any of their cattle for sale.  Although Mr. Vallette testified              
          without contradiction that he tried before the subject years to             
          remedy his problem with “bad cattle” by switching his breed of              
          cattle to a breed that his “common knowledge” told him was the              
          better breed, we do not believe that this self-supporting                   
          statement standing alone is enough to establish a profit intent.            
          The fact that petitioners’ activity experienced losses year after           
          year, and that they took no action to explain the losses or to              

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