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testimony and other evidence in the record do not support
petitioner’s claim that he established a meaningful business plan
for the ranch. Contrary to petitioner’s testimony that his
business plan (during the years before us and in prior years) was
to retain female calves and to sell only male calves, in many
years petitioners sold the female calves along with the male
calves.
Acknowledging that he maintained no formal books and records
for the ranch activity, petitioner emphasizes that he did keep
all expense receipts and was able to substantiate, to
respondent’s satisfaction, the ranch-related expenses claimed on
petitioners’ tax returns. We believe, however, that these
circumstances are more indicative of good tax planning than
operation of a for-profit business.
The credible evidence does not establish that petitioners’
cattle ranch was operated for profit. The ranch never came close
to making a profit. Petitioner testified that he did not believe
he would ever achieve profitability as long as he was buying
land, but thereafter he could “revive” it. Petitioner testified:
I don’t know that you can ever become profitable in
this business if you’re first generation [raising
cattle]. * * * if you start at ground level zero, you
don’t own an acre of land, you don’t own a cow, you
have got to buy the land and improve it and put the
cattle on it, I don’t know if you would ever reach
profitability that way.
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