Charles H. Butler and Judith K. Butler - Page 16

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            contended that he was unable to implement that project because of                            
            disputes concerning the water usage.  Other than a drought in                                
            1987, the litigation concerning the reservoir apparently was not                             
            an impediment to petitioners' use of the reservoir for raising                               
            fish.                                                                                        
                  Petitioners testified that significantly increasing the size                           
            of their livestock herd would result in profitability for their                              
            farming venture; however, their herd remained approximately the                              
            same during the years at issue (25 cattle and 60 sheep) and at                               
            the time of trial (22 cattle and 65 sheep).                                                  
                  The Expertise of the Taxpayers or Their Advisers.                                      
            Petitioners were not experienced farmers, and although petitioner                            
            wife had some experience in raising game birds, she did not                                  
            demonstrate that she took steps to successfully operate a farm.                              
            Petitioners attempted to become knowledgeable about the market                               
            for cattle and sheep; they sought advice from local farmers, read                            
            farming materials from the San Mateo Farm Bureau, and consulted                              
            with various institutions such as the University of California at                            
            Davis, as well as the U.S. Department of Soil Conservation.                                  
                  Time and Effort Expended by the Taxpayers in Carrying On the                           
            Activity.  Petitioners expended significant time in the farming                              
            activity.  Petitioner husband worked full time as an engineer,                               
            and he also worked approximately 30 hours a week (10-12 hours per                            







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