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most of his energies to the activity may be evidence that the
activity was engaged in for profit. See sec. 1.183-2(b)(3),
Income Tax Regs.
Respondent does not dispute that Mrs. Knudsen devoted a
substantial amount of time and effort to petitioners’ exotic
animal breeding activity. However, respondent argues that Mrs.
Knudsen gained personal satisfaction from spending time with the
animals, and thus, the significant amount of time and effort she
spent with them does not evidence a profit objective.
Although Mrs. Knudsen gained enjoyment from her animals,
many of her duties were not personal or recreational. For
example, Mrs. Knudsen cleaned stalls and cages, disposed of
animal waste and carcasses, and cared for animals during the
night. The fact that a taxpayer derives some personal
satisfaction from a business does not turn it into a hobby.
Jackson v. Commissioner, 59 T.C. 312, 317 (1972); Giles v.
Commissioner, T.C. Memo. 2006-15; McKeever v. Commissioner, T.C.
Memo. 2000-288.
Mrs. Knudsen operated and managed ERE.17 Although she worked
part time in Dr. Knudsen’s medical practice, Mrs. Knudsen devoted
substantial amounts of her time to ERE. In addition to Mrs.
Knudsen’s labor, ERE hired several employees to help maintain the
17During a brief period, ERE hired a manager to help Mrs.
Knudsen manage ERE.
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Last modified: March 27, 2008