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number of steers on the Colorado ranch.4 In 1994, petitioners
purchased for the Colorado ranch a very limited amount of cattle
which they subsequently sold in late 1994.
Kerrville Farm
In 1993, petitioners purchased 100 acres of land in
Kerrville, Texas (Kerrville farm), for $275,000. Petitioners
purchased the Kerrville farm with the intent of retiring and
harvesting pecans on the Kerrville farm.
Petitioners constructed two houses on the Kerrville farm;
i.e., a large and beautiful residence for themselves (retirement
home) and a small home for their part-time caretaker.
Construction on their retirement home began in 1993 and concluded
in 1994. During those years, petitioners cleared the land of
cedar and rocks, leveled the land, and made various other
improvements. In 1994, petitioners purchased six longhorn
steers, which could not be bred, for $4,000 and placed them on
the Kerrville farm. In 1995, 1 year after the years in issue,
petitioners planted their first pecan trees on the Kerrville
farm. Normally, a pecan operation becomes profitable 7 to 10
years after the planting of the pecan trees.
Petitioners did not maintain any business records such as
budgets, operating statements, written business plans, or
financial projections with regard to the ranching and farming
4 The record does not establish whether petitioners sold or
retained the steers that they maintained on the Colorado ranch in
1993.
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