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I. Conclusion
After reviewing the entire record,8 we conclude that
petitioners did not engage in the ranching and farming activities
with an actual and honest objective of making a profit within the
meaning of section 183.9 Because we dispose of the section 183
issue against petitioners, we need not reach respondent’s
alternative argument that petitioners have failed to substantiate
the claimed expenses which resulted in losses for the ranching
and farming activities.
II. St. John Rental Property Expenses
On their 1994 tax return, petitioners deducted $149,230 of
expenses with regard to the St. John rental property. On the
notice of deficiency, respondent determined that petitioners and
the Trust had substantiated expenses in the amount of $64,937, of
which petitioners could deduct one-half.10 Petitioners bear the
burden of proof with regard to the claimed deductions. See Rule
8 Petitioners submitted an expert report by Stephen J.
Kleberg, which opined, among other things, that petitioners
conducted their ranching and farming operations in a businesslike
manner. We found Mr. Kleberg’s report and testimony to be of no
assistance in deciding this case. In light of the fact that Mr.
Kleberg visited only the Melrose and Chireno ranches and did not
evaluate petitioners’ limited books and records, his testimony
was implausible or questionable.
9 We have evaluated various facts and circumstances
subsequent to the years in issue. See Taube v. Commissioner, 88
T.C. 464, 482 (1987). These facts and circumstances do not
affect our conclusion that petitioners did not have a profit
motive during the years in issue.
10 Since the issuance of the notice of deficiency,
respondent has made several concessions affecting the $64,937 in
expenses.
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