- 39 -
in for profit and the expenditures are directly related to
the income potential of the property. [Id. at 19-20.]
Respondent's argument fails to appreciate that in a very
real sense petitioners' timber farm, in every year, was
maintained for the purpose of generating income through the
growth and increase in value of the trees. Respondent's
argument also fails to appreciate that in the timber business,
individual trees typically are harvested only once every 50 to
60 years. Respondent’s argument, carried to the extreme, would
treat taxpayers in the timber business as engaged in that
business, for Federal income tax purposes, only in the
particular year they actually harvest trees.
The evidence in this case indicates and supports our
conclusion that petitioners invested in their timber farm with
an actual and good faith profit objective and that petitioners'
operation and management of the timber farm constituted a
legitimate business activity.
This case is not dissimilar from Allen v. Commissioner,
supra, and Hoyle v. Commissioner, T.C. Memo. 1994-592, in which
the taxpayers' financial resources, among other things,
explained the taxpayers' ability, over a number of years, to
absorb large expenses and losses until appreciation in the value
of the property is realized. The explanation provided in Allen
v. Commissioner, supra at 36, is particularly apropos:
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