John R. and Edith M. Garbini - Page 8

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          188 F.3d 507 (6th Cir. 1999).                                               
               “A change of operating methods, adoption of new techniques             
          or abandonment of unprofitable methods in a manner consistent               
          with an intent to improve profitability may also indicate a                 
          profit motive.”  Sec. 1.183-2(b)(1), Income Tax Regs.  Petitioner           
          contends that he has made efforts to reduce expenses in order to            
          operate the ranch in a profitable manner.  Nothing in the record            
          indicates what efforts to reduce expenses, if any, were made                
          during the taxable years in issue.  Petitioner never ascertained            
          how or when he would make a profit or how he could change his               
          operating methods to improve his profitability.  Although                   
          petitioners owned cattle during the years in issue, there were no           
          sales of cattle during those years.  Nor was there any evidence             
          of an effort to raise cattle for profit on their ranch.                     
              We next consider the expertise of the taxpayer.  Since                 
          purchasing the ranch, petitioner has learned about the types of             
          trees that should be planted in specific areas on the ranch.                
          Petitioner also claimed that in 1986 he began studying,                     
          researching, and compiling data on the marketing and sale of                
          verified emission reduction offsets (carbon credits) to polluting           
          entities, and that he has consulted about that subject with the             
          Oregon Department of Forestry and a chemistry/biology professor             
          who holds a Ph.D.  Yet, during the years in issue petitioner did            
          not put any acquired knowledge to use in an endeavor to make a              

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