- 14 - A. Manner in Which the Activity Is Conducted The fact that a taxpayer carries on the activity in a businesslike manner and maintains complete and accurate books and records may indicate a profit objective. See sec. 1.183-2(b)(1), Income Tax Regs. Petitioners presented the Court with voluminous receipts, invoices, and canceled checks allegedly evidencing expenditures for the four properties. After reviewing the evidence, we cannot determine whether the expenditures were exclusively for the benefit of the four properties (instead of the rental properties) and which expenditures, if any, related to which specific ranch or farm. The parties also stipulate that petitioners did not prepare any budget or operating statements. Further, the parties stipulate that petitioners did not create a written business plan or any financial projections. Petitioners conducted their activities unaware of the amount of revenue they could reasonably generate and had no credible estimate of the costs associated with the four properties. We conclude that petitioners did not conduct the ranching as a separate activity. In order to ascertain whether petitioners have conducted separate activities, we must evaluate all the facts and circumstances of the case. See sec. 1.183- 1(d)(1), Income Tax Regs. Although we find that the ranching and farming activities on the four properties are one activity, we note that the outcome of this case would have been the same had we concluded that petitioners maintained separate activities on each of the four properties or two activities (one for ranching and one for farming).Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Next
Last modified: May 25, 2011