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profit.
We next consider the time and effort expended by the
taxpayer in carrying on the activity. Petitioner worked on the
ranch almost everyday and employed one full-time ranch hand
during the taxable years in issue. The ranch hand performed
general maintenance of the property and barns. Petitioner
occasionally hired outside temporary labor.
We next consider the taxpayer’s expectation that the assets
used in the activity may appreciate in value. Petitioner
contends that he has enhanced and created value in the trees and
the carbon credits related to the trees. Petitioner paid
$566,000 for the ranch in its undeveloped condition. With the
improvements made by petitioner and the value of the timber and
carbon credits, petitioner estimates that the value of the trees
alone is $2.5 million and that the ranch is worth $15 million.
Petitioner did not provide any basis for such estimates.
Petitioner stated that since 1984, with the exception of 1994 and
1995, he has planted 3,000 to 5,000 trees per year. Petitioner
further stated that these trees are not considered suitable for
harvesting until 7 years after planting. We note that no trees
were harvested during the taxable years in issue. Petitioner
contends that the growing trees have value and profit potential
in the form of cut timber and carbon credits. Again, petitioner
never sold any carbon credits during these 2 taxable years.
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