James C. Vallette and Arleen R. Vallette - Page 13

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          ability to earn this income let them finance their breeding                 
          activity, and it allowed them to use the activity's losses to               
          reduce significantly their income tax liability for each year.              
               This factor favors respondent's determination.                         
               9.  Elements of personal pleasure                                      
               We consider the personal pleasure derived by petitioners               
          from conducting their activity.  See sec. 1.183-2(b)(9), Income             
          Tax Regs.  Although the mere fact that a taxpayer derives                   
          personal pleasure from a particular activity does not negate a              
          profit intent with respect thereto, the presence of personal                
          motives may indicate that the activity is not engaged in for                
          profit.  This is especially true where there are recreational or            
          other personal elements involved.  Id.                                      
               Our review of the record, in conjunction with our                      
          observation of petitioners during their testimony, leads us to              
          believe that they had strong personal reasons for breeding                  
          cattle.  Our observation of petitioners testifying at trial leads           
          to the inescapable conclusion that they each gained significant             
          personal pleasure from their involvement in the cattle industry,            
          and that their enjoyment and satisfaction would have been the               
          same regardless of the activity’s bottom line.  See Ballich v.              
          Commissioner, T.C. Memo. 1978-497.  Among other things, we                  
          believe that Mr. Vallette, the backbone of petitioners' breeding            
          activity, engaged in that activity due to his affection for                 
          cattle.  He has been involved with cattle since a very young age,           

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