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These deficiencies stem from respondent’s disallowance of certain
deductions and losses attributable to petitioners’ cattle-raising
and deer operations (sometimes referred to as petitioners’ Schedule
F activities)1 conducted during the years in issue. Petitioners’
Schedule F activities were conducted at two different locations:
Buckview Ranch (the North Ranch), which is located in Leon County,
near Centerville, Texas, and El Squato Ranch (the South Ranch),
which is located in Wells County, near Encinal, Texas.
The issue for decision is whether petitioners’ Schedule F
activities were activities engaged in for profit. We hold they
were not.2
All section references are to the Internal Revenue Code as in
effect for the years in issue.
1 The parties stipulated that the cattle-raising and deer
operations constitute one activity.
2 During the course of trial preparation, respondent’s
counsel discovered that certain labor and fuel costs claimed on
petitioners’ 1992-94 returns as expenses were capital in nature
and should have been depreciated rather than expensed.
Thereafter, respondent filed an amendment to answer asserting
that if petitioners should prevail in their position that the
cattle-raising and deer operations were activities engaged in for
profit, then deficiencies would still be due, but in lesser
amounts, for the years in issue as a result of petitioners’
misclassification of the labor and fuel costs. Petitioners
apparently do not dispute respondent’s assertion in this regard.
In any event, in view of our holding that petitioners’ Schedule F
activities were not activities engaged in for profit, this matter
goes by the wayside.
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