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in the orchard was not extensive,4 it was apparently enough to
grow approximately 40,000 pounds of apples during 1993 and 1994.
Petitioner testified that he did all of the picking himself;
however, he did not pick all of the apples. Thus, petitioner did
not make sufficient effort to profit by the time that he and Mrs.
Zdun spent in the orchard for the Court to find that making a
profit was the motive for their time in the orchard. We find
that this factor weighs against petitioners.
Fourth, an expectation that the assets used in the activity
may appreciate in value is an indication of a profit motive. The
term "profit" encompasses an appreciation in the value of assets,
such as land, used in an activity. Thus, the taxpayer may intend
to derive a profit from the operation of the activity, and may
also intend that, even if no profit from current operations is
derived, an overall profit will result when appreciation in the
value of land used in the activity is realized since income from
the activity together with the appreciation of land will exceed
expenses of operation. Sec. 1.183-2(b)(4), Income Tax Regs.
Petitioner asserts that one of the reasons he planted the trees
was to increase the value of the Tiller property, and that the
apple orchard has increased the property value by a minimum of
4 On an annual basis, petitioner spent between 9 and 12
hours per week in the orchard.
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