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(6) the taxpayer's history of income or losses with respect to the
activity; (7) the amount of occasional profits, if any, which are
earned; (8) the financial status of the taxpayer; and (9) whether
elements of personal pleasure or recreation are involved. See sec.
1.183-2(b), Income Tax Regs.
The taxpayer's expectation of profit need not be reasonable.
See Golanty v. Commissioner, 72 T.C. 411, 425-426 (1979), affd.
without published opinion 647 F.2d 170 (9th Cir. 1981); Allen v.
Commissioner, supra at 33; sec. 1.183-2(a), Income Tax Regs. In
determining whether an activity is engaged in for profit, greater
weight is given to objective factors than to a taxpayer's mere
statement of intent. See sec. 1.183-2(a), Income Tax Regs.
Although no one factor is conclusive, a record of
substantial losses over many years and the unlikelihood of
achieving a profit are important factors bearing on the
taxpayer's objective. See Golanty v. Commissioner, supra at 426;
sec. 1.183-2(b)(6), Income Tax Regs. Petitioners have the burden
of proof on this issue. See Rule 142(a).
During, before, and after the years in issue, the limited
time petitioners spent working with the cattle on the ranch and
in the ranch activity is consistent with a hobby, not with a
legitimate for-profit activity. Petitioner’s use of his and
his wife’s personal checking account to pay ranch expenses and
the lack of a written business plan, a ledger, and a budget for
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Last modified: May 25, 2011