- 11 -
area, and he had experience producing row crops, hay, and
livestock. He points out that he worked closely with Harris, who
operated his own farm and who worked on the Mitchell farm for
more than 20 years.
We disagree. The record does not show that petitioner knew
how to make a profit producing livestock, hay, or timber. He did
not seek expert advice on how to operate his farm profitably. He
discussed farming with his farmer clients and farmer neighbors,
but there is no evidence that they gave advice to him about
farming for profit. This factor favors respondent.
3. The Taxpayer's Time and Effort
The fact that a taxpayer devotes much time and effort to
conducting an activity may indicate that he or she has a profit
objective. Sec. 1.183-2(b)(3), Income Tax Regs. Petitioner
worked on the farm 750 to 2,000 hours per year during the years
in issue. However, he did not explain how the work he performed
there related to making a profit. This factor is neutral.
4. Expectation That Property Used in the Activity Will
Appreciate in Value
A taxpayer may intend to make an overall profit when
appreciation in the value of assets used in the activity is
anticipated. Sec. 1.183-2(b)(4), Income Tax Regs. There is an
overall profit if net earnings and appreciation would exceed
losses in prior years. Bessenyey v. Commissioner, 45 T.C. 261,
274 (1965), affd. 379 F.2d 252 (2d Cir. 1967).
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011