Terry F. and Carol J. Zdun - Page 17

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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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