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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).
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