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intermingled personal funds with those from their Schedule F
activities. Additionally, despite the industry custom of
maintaining yearly “herd books” for cattle, petitioners often
failed to record and maintain accurate documentation of their
inventory.
Despite experiencing losses in 24 of the first 25 years of
operation (1973-97), there is no convincing evidence in the record
indicating that petitioners undertook substantial action to rectify
this situation. In fact, petitioner testified that he anticipates
petitioners’ cattle-raising activities will not be profitable for
the foreseeable future. Even with this stark economic reality
facing them, petitioners have not seriously investigated the
possibility of changing or abandoning any of their current methods
of operation. Suffice it to say, we believe that petitioners’
failure to take affirmative measures to mitigate continual and
substantial losses is inconsistent with operating an activity with
a profit motive.
2. Expertise of Taxpayer or Advisers
Preparation and execution of an activity after conducting an
extensive study or consultation with experts regarding the accepted
business practices of the activity may indicate a profit motive
where the taxpayer conducts the activity in accordance with such
study or advice. See sec. 1.183-2(b)(2), Income Tax Regs.
Conversely, a taxpayer’s failure to obtain expertise in the
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