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make a profit.” Id. Petitioner here testified, without any
supporting data, that he would need to sell approximately 40 cows
to make a profit, but in none of the years at issue did he ever
attempt to place 40 animals on his property. It is therefore
doubtful that petitioner had any plan to profit in those years.
Thus, based on the above considerations, petitioner’s cattle
ranch does not appear to have been operated in a businesslike
manner. This factor fails to indicate a profit objective.
2. The expertise of the taxpayer or his advisors.
Section 1.183-2(b)(2), Income Tax Regs., reads:
Preparation for the activity by extensive study of its
accepted business, economic, and scientific practices,
or consultation with those who are expert therein, may
indicate that the taxpayer has a profit motive where
the taxpayer carries on the activity in accordance with
such practices. * * *
Case law further explains that “While a formal market study is
not required, a basic investigation of the factors that would
affect profit is.” Burger v. Commissioner, T.C. Memo. 1985-523;
see also Engdahl v. Commissioner, 72 T.C. 659, 668 (1979);
Underwood v. Commissioner, T.C. Memo. 1989-625. Moreover, in
considering this factor, courts have made clear that the focus is
upon expertise and preparation with regard to the economic
aspects of the particular business, and failure to possess or
obtain expertise in this area will not be excused by study of
other aspects of the enterprise or by general business acumen.
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