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in carrying out the Schedule F activities. However, we are mindful
that initially petitioner performed many of the required chores
around the North Ranch. At the same time, however, petitioners
used the property for hunting and fishing trips, as well as to
entertain guests during the holiday season. As a result, we are
unable to draw an inference regarding the existence of a profit
motive solely from how much time and effort petitioners may have
expended working on their Schedule F activities.
4. Expectation That Assets May Appreciate
An expectation that assets used in the activity will
appreciate may indicate a profit objective. See sec. 1.183-
2(b)(4), Income Tax Regs. Accordingly, a profit motive may be
inferred where there are no operating profits, so long as the
appreciation in value of the activity’s assets exceeds its
operating expenses of the current year and its accumulated losses
from prior years. See Golanty v. Commissioner, 72 T.C. 411, 427-
228 (1979), affd. 647 F.2d 170 (9th Cir. 1981); Sullivan v.
Commissioner, T.C. Memo. 1998-367, affd. 202 F.3d 264 (5th Cir.
1999); sec. 1.183-2(b)(4), Income Tax Regs.
Between 1976 and 1997, the amount of accumulated losses from
petitioners’ Schedule F activities exceeded $1.8 million.
Petitioners anticipate that they will continue to incur operating
losses from these activities in the near future.
During the years in issue, the value of the North Ranch
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