- 12 -
Stubblefield v. Commissioner, T.C. Memo. 1988-480; Ruben v.
Commissioner, T.C. Memo. 1986-260, affd. without published
opinion 852 F.2d 1290 (9th Cir. 1988). Petitioners purchased and
held the property as a personal residence for 3 years before
converting it into a ranch. Silk Oak still serves as
petitioners' residence, and the valuation in question, stipulated
by the parties, used a market comparison approach to real estate
valuation. The properties used by the appraiser in comparison to
petitioners' property were residential properties, rather than
ranches. The appreciation of the real estate in question,
therefore, is based upon its use as a residence, rather than as a
horse ranch. Ruben v. Commissioner, supra. Consequently, we
will not consider the real estate as an appreciated "asset" held
by petitioners to offset Silk Oak's losses. Id.
Petitioners also argue that they had hoped that appreciation
in the value of their horses would yield a profit in the future.
Petitioners' losses from the operation of Silk Oak total
$145,510. At the time of trial, petitioners owned eight horses
and had never generated more than $2,500 in profit from the sale
of any one horse. Even if their entire stock of horses were
liquidated at fair market value, the maximum profit generated
would be $42,000. It is, therefore, unlikely that petitioners
will generate any profits from the sale of their horses in the
near future that would recoup more than a fraction of the past
losses. This factor favors respondent.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011