Paula L. Wilson - Page 8

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          law enforcement careers, devoted considerable time to, and                  
          handled all material aspects of, the activity.  Sec. 1.183-                 
          2(b)(3), Income Tax Regs. (stating that the fact that a taxpayer            
          devotes substantial personal time and effort to carrying on an              
          activity may indicate an intention to derive a profit).                     
               Petitioners expected their farm and herd to appreciate.                
          Furthermore, petitioners devoted all of their savings from their            
          law enforcement salaries to the activity.  They are hardworking,            
          diligent, and levelheaded.  We do not believe that they would               
          squander their hard-earned money on an extravagant hobby.                   
               The fact that the taxpayers do not have substantial income             
          or capital from sources other than the activity may indicate that           
          the activity is engaged in for profit.  See sec. 1.183-2(b)(8),             
          Income Tax Regs.  Although petitioners suffered several setbacks            
          (e.g., the injuries suffered by Ms. Wilson, the death of Scotch N           
          Lark, etc.) that prevented them from making a profit, they                  
          actually and honestly believed that their future earnings and               
          profit would be substantial.                                                
               Contentions we have not addressed are irrelevant, moot, or             
               To reflect the foregoing,                                              
                                                  Decisions will be entered           
                                             for petitioners.                         

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