- 22 -
Petitioner is actively involved in examining the annual
business plans for Flying H. During the years in issue,
petitioner's business manager would review the financial results
of the operation in detail with MacCarty, working up budgets and
plans, which petitioner studied and either approved or amended.
Respondent concedes that Flying H is not an over-improved
property. The main ranch house was on the property when
petitioner purchased it. Respondent further concedes that the
facilities at Flying H are not extravagant or showy, but are
rather ordinary and functional, just like any other working
western ranch.
Discussion
As evidence of a lack of profit motive, respondent focuses
on Flying H's history of losses, petitioners' use of such losses
to offset other income, and the pleasure aspect of the activity.
As discussed above, these factors alone do not negate a finding
that petitioners engaged in their ranch activity with an intent
to make a profit, especially given that the years in issue fall
within the startup period of the activity. See Trafficante v.
Commissioner, T.C. Memo. 1990-353 (a series of losses during the
initial stages of an activity does not necessarily indicate that
the activity was not engaged in for profit).
The parties have stipulated that petitioners carried on
their ranching activity in a businesslike manner and maintained
complete and accurate records. Moreover, respondent concedes
Page: Previous 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 NextLast modified: May 25, 2011