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reservoir water. The irrigation system had been recommended by
the San Mateo Farm Bureau and the U.S. Department of Soil
Conservation as the best method to maximize the productivity of
the land or livestock. Subsequently, for the next several years,
petitioner husband spent significant amounts of money to extend
and maintain the irrigation system.
Petitioner husband expected that the Pescadero property
would appreciate over time, and he was prepared to invest
additional capital toward that end. Petitioner husband believed
that the ranch was worth $1 million.
Farming Activity
Prior to the purchase of the Pescadero property, when
petitioners resided in Sonoma County, California, petitioner wife
worked for 2 years, without pay, for an individual who operated a
ranch that raised game birds for hunting purposes. Early in
petitioners’ ownership of the Pescadero property, petitioner
wife, with the intention of starting a similar operation,
transported a number of chukars and quail to the Pescadero
property. The game bird activity, however, was ultimately
unsuccessful.
Subsequently, petitioner wife ascertained that neighboring
farms were raising goats and sheep. In turn, she purchased goats
and sheep as livestock for the Pescadero property. During the
taxable years at issue, petitioners maintained approximately 25
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Last modified: May 25, 2011