- 20 -
the valuation proposed by Mr. Rodriguez; petitioner argues that
we should accept the valuation proposed by Mr. Bierschwale. Both
reports, however, conclude that by the close of the last taxable
year in issue (1996) the Campbell ranch increased in value from
its purchase price. The only dispute between the parties is to
whether value increased by $56,000 or $150,000. The Campbell
ranch increased in value by at least $56,000, and this supports
Mr. Rinehart’s expectation that the assets used in the activity
would appreciate in value and petitioners’ contention that the
horse breeding activity was engaged in for profit.22
Additionally, IRS economist Roderick Moss testified that he
thought Mr. Rinehart’s horse breeding activity could be
profitable in the future. Accordingly, we conclude that this
factor favors petitioners for the years in issue.
Mr. Rinehart’s Success in Similar or Dissimilar Activities
The uncontradicted evidence establishes that Mr. Rinehart
enjoyed success in two previous cattle activities--the polled
Hereford breeding activity and the Hereford breeding activity.
This is indicative of the requisite profit motive.
History of Income or Loss
Mr. Rinehart incurred hundreds of thousands of dollars in
22 We note that the parties submitted evidence regarding
the valuation of petitioners’ herd of horses. The factual and
expert evidence, however, concerns the value of the horses in
2000--a year well beyond the years in issue.
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011