- 21 -
soil on his property or its suitability for ranching until
November of 1995. He also did not receive any estimate of the
number of cattle his ranch could support (which turned out to be
only 17) until 1997. This scenario of holding ranch land for
years without even determining whether it could economically or
physically support a profitable operation is hardly consistent
with a profit objective.
3. The time and effort expended by the taxpayer in carrying on
the activity.
Section 1.183-2(b)(3), Income Tax Regs., specifies that
devoting much personal time to an activity, as well as withdrawal
from another occupation in order to devote such time, may be
evidence of a profit objective. Although the regulations do not
define the term “much”, cases offer some guidance as to
qualifying quantities. In a large percentage of decisions where
time spent was found to be probative of intent to profit, the
taxpayers were devoting more than 30 hours to the enterprise on a
weekly basis. See, e.g., Engdahl v. Commissioner, supra at 670
(taxpayers spending an average of 35 to 55 hours per week on
horse-breeding venture); Dodge v. Commissioner, supra (husband
and wife combining for approximately 35 hours per week spent
working on horse farm); McGuire v. Commissioner, T.C. Memo. 1992-
542 (taxpayer spending more than 40 hours per week on cattle
business); Haladay v. Commissioner, T.C. Memo. 1990-45 (husband
and wife combining for more than 80 hours per week spent working
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011