Court Opinion

ID: 4621217
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:44:13.91054+00
Date Added: 2024-06-11T07:55:58.141923
License: Public Domain

FINIS R. WELCH AND LINDA J. WAITE, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Waite v. Comm'rDocket No. 20611-12 United States Tax Court2017 Tax Ct. Memo LEXIS 228; November 20, 2017, FiledDecision text below is the first available text from the court; it has not been editorially reviewed by LexisNexis. Publisher's editorial review, including Headnotes, Case Summary, Shepard's analysis or any amendments will be added in accordance with LexisNexis editorial guidelines.*228 Docket No. 20611-12. Filed November 20, 2017.George W. Connelly, Jr.,and Heather M. Pesikoff, for petitioners.M. Kathryn Bellis, Courtney M. Hill, and Sharbel Sfeir (student), forrespondent.MEMORANDUM FINDINGS OF FACT AND OPINIONPARIS, Judge: Respondent determined deficiencies of $869,416,$1,533,336, and $1,220,441 in Dr. Welch (petitioner) and Dr. Waite's1 Federal1Both petitioners have earned doctoral degrees, and they will be referred to (continued...)- 2 -[*2] income tax for 2007, 2008, and 2009, respectively, and determined adeficiency of $1,316,520 in petitioner's Federal income tax for 2010. The soleissue for decision is whether petitioner's ranching activity was engaged in forprofit under section 183 for the years in issue.2FINDINGS OF FACTSome of the facts have been stipulated and are so found. The firststipulation of facts, the first supplemental stipulation of facts, and facts drawnfrom the stipulated exhibits are incorporated herein by this reference. Petitionerresided in Texas and Dr. Waite resided in Illinois when they timely filed theirpetition.I. Petitioners' BackgroundsA. PetitionerSince middle school petitioner has been involved in vocational agricultureactivities. He continued*229  those activities through high school. Tragically,petitioner was in a severe automobile accident during his freshman year of college1(...continued)as petitioner and Dr. Waite or petitioners.2Unless otherwise indicated, all section references are to the Internal Revenue Code (Code) of 1986, as amended and in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.- 3 -[*3] and has been in a wheelchair since. After his recovery he continued hiseducation and earned a bachelor of science degree in agricultural economics fromthe University of Houston in 1961 and earned a Ph.D. in economics from theUniversity of Chicago in 1966.Petitioner has had a multifaceted career. He was an economics professor for40 years and taught at the University of Chicago, Southern Methodist University,the City University of New York, University of California at Los Angeles, andTexas A&M University, and he retired from the last in 2003. In the early 1970s hebegan testifying as an expert witness in civil litigation cases. In 1976 he foundedWelch Consulting and, as of the time of trial, was its sole owner, president, andchief executive officer. Welch Consulting*230  is a private consulting firm thatprovides economic and statistical consulting for lawsuits involving discriminationclaims. It has offices in Los Angeles, California, Washington, D.C., and Bryan,Texas.3In 1979 petitioner incorporated Unicon Research Corp. (Unicon). ThroughUnicon petitioner conducted his major research activities, which were funded byFederal grants and contracts. Because he found the bureaucratic process of3Bryan, Texas, is a small town near College Station, Texas, the location of TexasA&M University, and is approximately one hour from petitioner's ranch.- 4 -[*4] obtaining Federal funding too cumbersome, he began funding his ownresearch and supporting it with assistance from Unicon and Welch Consulting. Asof the time of trial petitioner still performed managerial activities at Unicon.In 1982 petitioner formed a partnership, Computing Resource Center(CRC), of which he was a 50% partner. CRC eventually became StataCorp LP.StataCorp provides software for the research community. During the years inissue petitioner was no longer involved in StataCorp's day-to-day operations anddid not receive a salary from it.In 2007 petitioner formed PayEval to develop a statistical program*231  thatwould assist businesses in assessing the equal opportunity outcomes betweendemographic groups in pay, promotion, and other areas. After two or three yearshe was unable to sell the program and ceased development. Starting in 2009petitioner considered PayEval part of Welch Consulting.Meanwhile, back at the ranch in Texas Fridays and Saturdays were workdays, with the ranch being relatively quiet on Sundays. During the years in issuepetitioner spent Thursday nights through Sundays at his ranch.Petitioner has never had a written business plan for any of his businessventures.- 5 -[*5] B. Dr. WaiteDr. Waite holds a master's degree and a doctorate in sociology. She hasbeen a professor at the University of Chicago since 1991. She and petitionermarried in 2007 and divorced in 2010. During the years in issue Dr. Waite splither time between Chicago, Illinois, and petitioner's ranch in Texas, spending theweekends at the ranch with petitioner. Although she toured the ranch withpetitioner and occasionally listened to his ideas and plans for it, Dr. Waite was notinvolved in any of the ranch operations.II. Center Ranch A. LandIn 1987 petitioner purchased the first 130 acres of land that would become*232 Center Ranch.4 Center Ranch now comprises nearly 8,700 acres on seven tracts ofland in Leon County, Texas, near Centerville.5 Petitioner purchased thousands ofthose acres during the years in issue. Center Ranch is split into the followingdivisions:4Petitioners offered expert reports for Center Ranch's real estate, its cattle, and its horses. Over respondent's objections, all of those reports were entered into evidence. Respondent offered no expert reports.5Petitioner owns 8,688 acres and leases another 900 acres for various ranch purposes. See infra p. 7.                    - 6 -                          [*6]                Acquisition        Purchase        Appraised  DivisionAcreage1    datespricevalue2    Headquarters    2,410        1987-2010    $4,493,166        $14,630,000        Buffalo Creek    1,274        1989-1999    861,563        2,720,000        Stanmire/River-                                            bottom    1,172        1990-2008    906,687        2,900,000        Coker Place    320        2006    639,000        1,032,000        Trinity River    2,703        2007, 2010    3,950,535        5,510,000        Keechi Creek    761        1998    477,300        2,970,000*233   Bull pens/                                            receiving                                            pens        48        1989        43,500            470,000        Total    8,688        n/a    11,371,751    330,232,000  1All acreage amounts are rounded to the nearest whole number.2The appraised values are as of Nov. 12, 2013, the inspection date of petitioner's expert witness.3The appraised value of each division includes the surface and mineral rights petitioner owned. The Keechi Creek Division had six acres fenced off for an oil pad, for which petitioner received rent. In 2010 petitioner earned over $900,000 of oil and gas royalties that he reported on a Schedule E, Supplemental Income and Loss (From rental real estate, royalties, partnerships, S corporations, estates, trusts, REMICs, etc.), attached to his return.Headquarters includes the veterinary clinic (vet clinic), the horse center, the horsetraining facilities, and the Mill Creek Division, which includes more than 45 acresof lakes.6 The divisions are noncontiguous tracts of land except for Headquarters6As of 2006 petitioner's personal residence was on 20 acres of Headquarters property and was not considered*234  part of Center Ranch.- 7 -[*7] and Mill Creek Division. Petitioner purchased Coker Place as an investmentproperty. Coker Place is wooded, and the 320 acres are leased for hunting.During the years in issue petitioner also leased approximately 900 acres known asSadler Place Division for ranch purposes.Additionally, petitioner owned two duplexes on approximately 20 acres ofland in Centerville. Although they were in town, petitioner considered theduplexes part of Headquarters. They were purchased when Center Ranch neededhousing for ranch hands. If the duplexes were not needed to house ranch hands,they were leased month to month.B. Ranch OperationsIn 1987 petitioner's original intent was to grow hay as a cash crop and toraise some cattle on the first 130 acres he had purchased. Center Ranch is now amultioperational, 8,700-acre ranch with 25 full-time employees who receiveannual salaries ranging from $25,000 to $115,000.7 Petitioner also employs part-time ranch hands as needed. Over the years petitioner has realigned his workforceto reflect current needs, and he has fired employees for nonperformance or7The median household income for Leon County was $40,355 in 2010. U.S. Census Bureau,*235  American FactFinder, https://factfinder.census.gov/bkmk/table/1.0/en/ACS/10_5YR/B19013/0500000U S48289 (last visited August 8, 2017). During the years in issue at least four Center Ranch employees' annual salaries were more than that.- 8 -[*8] inappropriate behavior. The three main Center Ranch operations are cattle,hay, and horses, each of which will be discussed in more detail infra.Center Ranch also had a vet clinic that provided services for large and smallanimals.8 Construction on the vet clinic began in 2003; it was originally built tosupport Center Ranch's horse operation. All of the vet clinic's employees--exceptthe veterinarians--were Center Ranch employees. There was a licensedveterinarian on site during each of the years in issue. Petitioner rented the vetclinic facilities to the veterinarians and had management services agreements andlicensing agreements with them. The vet clinic provided services for CenterRanch animals under the management services agreements. It provided servicesfor animals owned by the public for a fee. The vet clinic was a separate entity andfiled its own tax returns for the years in issue.Center Ranch had a trucking operation and owned multiple 18-wheeler*236 trucks that it used to move cattle and hay around the ranch and to transport cattlewhen they were purchased or sold. It also leased the trucks to move the cattle andthe hay of others, and it charged the third parties per load hauled. Center Ranch8The vet clinic did not start providing services for small animals until 2011, one year after the years in issue.- 9 -[*9] also performed backhauls--picking up a load on a return trip--to maximize itstrucks' use.Additionally, there was a timber operation--including a timber manager--and there were several hundred acres leased for hunting on Center Ranch. In thelate 1980s petitioner did only "a little bit" of hunting on ranch property and hasdone none since then. During the years in issue Center Ranch had a website and aFacebook page, advertised in the Quarter Horse Directory online, and had videosof its operations and of its horses performing in various competitions posted toYouTube. As with his other business ventures, petitioner did not have a writtenbusiness plan for Center Ranch.During the years in issue petitioner subscribed to the following professionalpublications: Brangus Journal, Angus Journal, Showbox (Texas Junior LivestockAssociation*237  publication), American Red Angus Magazine, Gulf Coast Cattleman,the Cattleman Magazine, the Maine Anjou Voice, Livestock Reporter, BrahmanJournal, Working Ranch Magazine, the Ear (a genetics marketing magazine), theProgressive Farmer, Rancher's Exchange, Western Horseman, Quarter HorseNews, Quarter Horse Journal, Cutting Horse Chatter, Reined Cow Horse News,Pacific Coast Journal, America's Horse, and Billings' Livestock CommissionHorse Sale Update.- 10 -[*10] 1. Cattle Operation9Soon after purchasing the initial 130 acres of land, and upon the advice ofhis high school vocational agriculture teacher, petitioner purchased 34 bred heifersat auction with the intent of using their calves to start a club calf operation.10Initially, petitioner's former teacher was going to manage the club calf operationfor him. Unfortunately, he passed away shortly before petitioner purchased thecattle. After a short period of managing the club calf operation, petitioner decidedthat it would not be profitable because the prices were low, the bred heifers hepurchased were not the preferred club calf breed and did not sell well, andmarketing the operation was too time consuming. In total the club calf operation*238 did not last more than five years.For business reasons petitioner decided to move to a beef cattle operationand began breeding purebred Maine Anjou cattle. Unfortunately, because thatbreed of cattle proved not well suited for the hot and humid climate of LeonCounty and did not do well, he again modified the operation. In 1996, after9Some common terms in the cattle industry include: (1) "calves", which are young cattle, (2) "heifers", which are young females that have not given birth to a calf, (3) "bred heifers", which are pregnant heifers, (4) "cows", which are mature females, and (5) "bulls", which are mature males.10Club calves are produced to be sold to participants in Future Farmers of America and 4-H who will raise and show them for educational purposes.- 11 -[*11] conferring with his ranch manager, petitioner sold his Maine Anjou herd andpurchased Brangus cattle, which had been developed by crossing Brahmas andAngus cattle. They were known to thrive in heat and humidity. He addedpurebred Angus cattle to the operation and hired a purebred cattle manager. All ofpetitioner's Brangus and Angus cattle were registered--the Brangus with theInternational Brangus Breeders Association*239  and the Angus with the AmericanAngus Association. Center Ranch's purebred herd operation used artificialinsemination for breeding purposes, which required constant care and supervisionof the purebred heifers in the herd. This proved to be too time intensive forpetitioner's ranch hands and was not successful; therefore, he sold his entirepurebred herd and fired the purebred cattle manager in 2006.Later that year petitioner, for business reasons, decided to hire a new cattlemanager and began raising a commercial cattle herd to operate a cow-calfoperation, in which the product was the calf.11 Petitioner's ranch employees hadpreviously worked his cattle operation on horseback and continued the traditionwith the commercial cattle herd. Because Center Ranch wanted to build the size11Commercial cattle are various breeds of cattle that are used to produce calves that are then sold when weaned for a price per pound. In contrast, feeder calves are weaned calves put on grain to gain weight, typically in a feed lot. Center Ranch planned to sell its calves when weaned and did not have a feeder calf operation.- 12 -[*12] of its herd, it did not sell any of its calves during the years in issue. In*240 addition a small herd of Longhorn cattle was also part of the cattle operation. TheLonghorn calves and the commercial calves were used in Center Ranch's horseoperation. Center Ranch's ranch manager estimated that it could carry a maximumof 2,000 head of mature cattle.12 During the years in issue portions ofHeadquarters and the Buffalo Creek, Trinity River, Stanmire/Riverbottom, andKeechi Creek Divisions were used for the cattle operation.2. Hay OperationIn 1988 petitioner began planting hay crop grasses and now grows CoastalBermuda grass and Tifton 85 Bermuda grass for hay crops in various pasturesacross Center Ranch. The weather conditions and cattle population would dictatewhich pastures were used, and if there was enough rainfall, the hayfields could beharvested four to five times a year. Because there were abnormally high toexceptionally high drought conditions in Leon County, Texas, during the years inissue, in an effort to reduce costs petitioner purchased specialized equipment thatcould spray herbicides at the same time the hay was fertilized. Additionally,Center Ranch cut its fertilizer costs by 10%-12% by spreading its own fertilizer.12This number does not include bulls and*241  calves.- 13 -[*13] The ranch hands who worked in the hay operation also worked in the cattleoperation.Center Ranch had also built its own feed mill that was used for the choppingand dry storage of the hay. The hay grown on Center Ranch was used to feed itslivestock and also to sell to third parties. Hay baled in round bales was to be fedto cattle in the pastures, and hay baled in square bales was to be fed to horses installs. Special baling equipment was purchased so that both large, one-ton-plusround bales and 40- to 70-pound square bales could be produced on CenterRanch's hayfields. Approximately two-thirds of the square hay bales were sold tothird parties as a cash crop. In the winter months when no hay was grown, CenterRanch incurred feed costs for its animals. In addition to hay the horses were fedpellets and alfalfa cubes that were purchased in bulk.- 14 -[*14] 3. Horse Operation13In 1999 petitioner attended his first cutting horse show and purchased hisfirst cutting horses--a yearling colt and a yearling filly.14 Neither of those horseswas trained for competition. They were purchased for the ranch's working horseherd to more efficiently work its cattle herd. In 2001 petitioner*242  purchased his firstcutting horse with the intent of showing it--a yearling mare, CR Cats Meow. Shewas not trained at Center Ranch but was sent to a professional trainer. CR CatsMeow never won a major competition and was eventually used solely in thebreeding program as a broodmare. In 2003 petitioner purchased a yearling colt,Smart Royal Rey, to be shown. Although Smart Royal Rey did not win a majorcompetition, in 2006 he did tie for seventh place in the National Cutting Horse13Some common terms in the horse industry include: (1) "foals", which are young horses, (2) "yearlings", which are horses between one and two years old,(3) "fillies", which are young females before they have foals, (4) "mares", which are female horses, (5) "broodmares", which are mature females expecting or nursing a foal, (6) "recipient mares", which are mares ready to be bred, typically through embryo transplant, (7) "colts", which are young male horses, (8) "stallions", which are male horses and when used for breeding are referred to as "studs", and (9) "sires", which is a term for the male parent of a horse.14A "cutting horse", although not breed specific, is typically an American quarter horse with natural*243  instincts to isolate and remove single animals from a herd. The horses are trained to cut cattle from a herd and contain and deliver them to a certain location. A cutting horse's skills are showcased by competition in timed events.- 15 -[*15] Association (NCHA) Futurity, the major cutting horse event.15 After SmartRoyal Rey's NCHA Futurity success, petitioner decided to train his horses atCenter Ranch in pursuit of future Futurity winners.In 2003 petitioner began construction of the horse center, which wascompleted in 2005. The horse center is a part of Headquarters; comprises sevenbuildings, which includes a residence for a horse trainer; and has special barns forstallions, 55 stalls, an arena for training the cutting horses, exercise lots, a walker,an exercise machine, fenced paddocks, a 200-acre pasture for recipient mares, a35-acre pasture for other mares, and a breeding facility, which operates in tandemwith the vet clinic at Center Ranch.16 See supra p. 8. All of the horse centerstructures, excluding the horse trainer's residence, are utilitarian work structures.Petitioner's expert witness valued the horse center at approximately $1,148,118.In 2004 petitioner purchased his first*244  broodmares for a cutting horse breedingprogram, purchased his last horses used for working horses on Center Ranch, andbegan focusing Center Ranch's horse operation on cutting horses.15The Futurity is for cutting horses what the Kentucky Derby is for thoroughbreds. Rounding out the cutting horse "triple crown" are the Super Stakes and the Summer Spectacular. Center Ranch entered horses in all three competitions.16The vet clinic also has a aquatread that is used to condition horses for competition and to rehabilitate injured horses.- 16 -[*16] Petitioner then spent two years studying cutting horse genetics andbloodlines in his search for a stallion to build Center Ranch's breeding program.He studied the patterns of cutting horse registrations to learn the bloodlines of thetop cutting horses. He was looking for an outcross17 to breed with the bloodlinesof the dominant stallions in the cutting horse industry. Petitioner also consultedcutting horse trainers, who are highly knowledgeable about and influential in thecutting horse industry.In late 2006 petitioner purchased his first two cutting horse stallions--PeppyPlays for Cash and Little Peppys Ultimo. He used Peppy Plays for Cash primarily*245 for breeding cutting horse mares. Before and during the years in issue petitionerbought and sold almost 100 horses. Some of those horses were foaled at CenterRanch. For business reasons petitioner decided to sell many of those horses at aloss because of their underperformance or unsuitability for next-generationbreeding traits.18 Petitioner also purchased semen and embryos obtained fromhorses with the right pedigree in an attempt to upgrade the level of cutting horsestrained at Center Ranch.17An "outcross" is a related bloodline bred with one not closely related.18Although Peppy Plays for Cash is now too old for breeding, petitioner keeps him at Center Ranch and continues to incur costs for his care. Petitioner testified that he did not consider the other options for the horse humane.- 17 -[*17] Petitioner decided that for Center Ranch's cutting horse operation to beprofitable he needed to breed or purchase a major stallion. To that end hepurchased then seven-year-old stallion Woody Be Tuff in early 2008.Petitioner's intent was for Center Ranch's horse operation to profit fromboth a breeding program and showing cutting horses. A breeding programgenerally includes the buying and selling*246  of stallion semen and mare embryos;petitioner bought and sold both. It takes several years to develop a stallion into astud. The basis of a stallion's value as a stud is his progeny, and a stallion's foalsare not typically eligible for competition until four years after breeding.It will take five to six years before there is credible information about astallion's breeding capabilities and his ability to pass on vital cutting horse traits tohis progeny. A stallion's stud fees will increase over time if his progeny aresuccessful. Although he was a proven stallion bringing in lifetime earnings ofover $340,000, during the years in issue Woody Be Tuff was a yet unproven studfor a breeding program--his stud fee was no more than $1,500. But by 2013 hisstud fee had increased to $2,000 plus a chute fee,19 and by 2014 it had increased to$5,000 plus a chute fee. As of the date of trial Woody Be Tuff's progeny had19A "chute fee" covers the expenses of collecting a stallion's semen for artificial insemination.- 18 -[*18] exhibited his genetic cutting horse traits and had generated prize winningsof over $500,000. Petitioner and Center Ranch can expect to collect semen fromWoody Be Tuff until he*247  is in his mid-20s.Center Ranch has two of the top cutting horse trainers in the nation underemployment contract, both of whom have previously been Futurity championriders. Training a Futurity-level cutting horse takes several years, and the trainingprogram required 75 calves every two weeks to train the cutting horses.20 CenterRanch's cattle operation usually provided the calves for the cutting horseoperation. Additionally, Center Ranch consigned calves for the cutting horsetraining. Although Center Ranch was paid according to the calves' weight gainduring their time at Center Ranch, those payments typically would not cover thefull cost of consigning the calves for training.Center Ranch did most of the training, but some of its cutting horses weresent to outside professional trainers. Cutting horse training does not begin untilthe horse is two years old. The only three-year-old horses remaining in trainingare those that have outstanding potential. Half of the horses bred cannot cut atcompetitive levels and become work horses. Additionally, it is not uncommon for20Calves used for the cutting horse training have to be continually changed out because once they become accustomed to being*248  around the horses they will not move.- 19 -[*19] horses to be injured during training. An injured or crippled horse's value issubstantially reduced and would sell for very little.Petitioner's horses were entered into the major cutting horse competitions,and he paid thousands of dollars in show fees each year in issue for them tocompete, which included entry fees, fees for stalls and shavings, and novice horsefees. There were often multiple Center Ranch horses entered in any one majorshow. Petitioner's horses were successful, and cutting horse competition winningsincreased each year in issue, from $19,231.31 in 2007 to $61,754.55 in 2010.21The competition winnings are split between the owner of and the rider of thehorse.Petitioner has invested $9,684,283.52 of his own money as capital forCenter Ranch's horse operation.22 He estimated that approximately two-thirds ofhis assets and approximately 80% of his annual income are devoted to CenterRanch. During the years in issue petitioner kept books and records for CenterRanch, and Center Ranch had separate bank accounts.21Center Ranch's horses had winnings of $150,901.83 in 2011. Additionally, one of Woody Be Tuff's foals from his first foal*249  crop at Center Ranch was a Futurity cochampion in 2012.22This amount includes capital for the vet clinic that overlaps with the horse breeding at Center Ranch. See supra p. 15.- 20 -[*20] C. Tax Returns and the Notice of DeficiencyAll of the returns for the years in issue were timely filed, and each includeda Schedule F, Profit or Loss From Farming. For 2007 petitioners reported grossincome of $1,947,824, total expenses of $4,102,617, and a loss of $2,154,793 onthe Schedule F attached to their return. The three largest expenses reported were adepreciation and section 179 expense deduction not claimed elsewhere(depreciation) of $860,438, labor hired of $763,339, and feed of $361,093.For 2008 petitioners reported gross income of $1,740,903, total expenses of$5,763,284, and a loss of $4,022,381 on the Schedule F attached to their return.The three largest expenses reported were depreciation of $1,205,992, labor hiredof $849,352, and feed of $601,547.For 2009 petitioners reported gross income of $1,598,824, total expenses of$4,829,330, and a loss of $3,230,506 on the Schedule F attached to their return.The three largest expenses reported were depreciation of $1,001,300, labor hiredof $834,434, and*250  feed of $442,858.For 2010 petitioner reported gross income of $1,557,821, total expenses of$4,944,260, and a loss of $3,386,439 on the Schedule F attached to his return. Thethree largest expenses reported were feed of $923,712, depreciation of $921,372,and labor hired of $757,917.- 21 -[*21] Respondent issued petitioners a notice of deficiency for 2007, 2008, and2009 determining that the "activity, Schedule F - Livestock" was not engaged infor profit, that the income reported on the Schedules F should have been reportedas "Other Income" on the returns, and that petitioners were entitled to a deductionfor expenses up to the amount of income that had been reported on the SchedulesF on Schedules A, Itemized Deductions.23 Respondent issued petitioner a noticeof deficiency for 2010 determining that the "activity, Schedule F - Livestock" wasnot engaged in for profit, that the income reported on the Schedule F should havebeen reported as "Other Income" on the return, and that petitioner was entitled to adeduction for expenses up to the amount of income that had been reported onSchedule F on Schedule A.OPINIONI. Burden of ProofGenerally, the Commissioner's determination of a deficiency is*251  presumedcorrect, and the taxpayer bears the burden of proving it incorrect. See Rule142(a); Welch v. Helvering, 290 U.S. 111">290 U.S. 111, 115 (1933). Moreover, deductions are23The Form 886-A, Explanation of Items, attached to the notice of deficiency included a statement that respondent had determined that sec. 6404(g) was applicable for 2007 and that notice was provided to petitioners on August 17, 2011. The parties did not address this issue.- 22 -[*22] a matter of legislative grace, and the taxpayer bears the burden of provinghis entitlement to any deductions claimed. INDOPCO, Inc. v. Commissioner, 503U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435">292 U.S. 435, 440 (1934).Under certain circumstances the burden of proof as to factual matters mayshift to the Commissioner pursuant to section 7491(a). Petitioners did not arguefor a burden shift under section 7491(a), and the record does not establish that theprerequisites for a burden shift have been met; therefore, the burden of proofremains theirs.II. Section 183Generally, the Code allows deductions for ordinary and necessary expensespaid or incurred in conducting a trade or business or for the production of income.Secs. 162(a), 212(1). Under section 183, if an activity is not engaged in for profit,then no deduction attributable to that activity is allowed except as provided for insubsection (b).To determine whether and to what extent*252 section 183 and the regulationsthereunder apply, the activity of the taxpayer must be ascertained. Sec. 1.183-1(d), Income Tax Regs. After all the facts and circumstances are taken intoconsideration, a taxpayer's multiple activities may be treated as one activity if theactivities are sufficiently interconnected. Id. Generally, the Commissioner will- 23 -[*23] accept the taxpayer's characterization of multiple activities as either a singleactivity or separate activities. Id. The taxpayer's characterization will not beaccepted, however, when it appears that it is artificial and cannot be reasonablysupported by the facts and circumstances of the case. Id.A. Whether Center Ranch's Cattle, Hay, and Horse Operations Were One ActivityAlthough the parties did not specifically address whether Center Ranch'soperations were one activity or separate activities, the Court will analyze thefactors from the regulations and caselaw to ascertain how many activities wereconducted on Center Ranch. After a review of all of Center Ranch's operations inrelation to the factors enumerated in the regulations and caselaw, the Court holdsthat Center Ranch's operations were one activity.1. Factors in the RegulationsUnder the regulations*253  the most important factors to be considered are: (1)the degree of organizational and economic interrelationship of the undertakings,(2) the business purpose served by carrying on the undertakings separately ortogether, and (3) the similarity of the undertakings. Id.All of Center Ranch's operations had a high degree of organizational andeconomic interrelationship. There was one ranch manager who oversaw all of its- 24 -[*24] operations and employees, and he reported directly to petitioner. Manyranch hands worked in more than one of Center Ranch's operations. The staffworking out of Headquarters provided support to all of Center Ranch's operations.All of the operations were economically intertwined, with the hay operationproviding feed for the cattle and horses and the cattle operation providing calvesfor training Center Ranch's cutting horses. Petitioner also started supportingoperations at Center Ranch--such as the vet clinic and trucking operation--tobenefit the inner workings of Center Ranch and to provide for-hire services toothers. All of Center Ranch's major operations were similar in that they werecommon operations to be performed on a working ranch in Texas. While it wouldbe*254  possible to operate a ranch with only one of the three major operations, it wouldnot be uncommon for other ranches to have the same operations as Center Ranch.The operations of Center Ranch meet all of the factors in the regulations to be oneactivity.2. Caselaw FactorsIn addition to the factors in the regulations, the Court considers thefollowing factors: (1) whether the activities are conducted at the same place; (2)whether the activities were part of the taxpayer's efforts to find sources of revenuefrom his land; (3) whether the activities were formed separately; (4) whether one- 25 -[*25] activity benefited from the other; (5) whether the taxpayer used one activityto advertise the other; (6) the degree to which the activities shared management;(7) the degree to which one caretaker oversaw the assets of both activities; (8)whether the taxpayer used the same accountant for the activities; and (9) thedegree to which the activities shared books and records. See Topping v.Commissioner, T.C. Memo. 2007-92, slip op. at 15 (citing Mitchell v.Commissioner, T.C. Memo. 2006-145, slip op. at 10-11).The cattle, hay, and horse operations were all conducted on Center Ranch's8,700 acres. The cattle and hay operations were spread over seven of thenoncontiguous tracts*255  of Center Ranch's land, and the horse operation was onHeadquarters acreage. Center Ranch lands were used as a source of revenue. Thecattle and horses grazed and were trained on Center Ranch's acreage, and the haygrown as a cash crop was sold to third parties. Although the three major CenterRanch operations did not all begin at the same time, they were each naturaloutgrowths of the use of Center Ranch lands.All of Center Ranch's operations were interrelated. The cattle and horseoperations both benefited from the hay operation because it provided feed for theanimals. The horse operation also benefited from the cattle operation because thecattle operation provided calves for the cutting horse training. The ranch manager- 26 -[*26] oversaw all of Center Ranch's operations, with the cattle manager, horsemanagers, and trainers reporting to him. He also was the caretaker of eachoperation's assets. Petitioner kept books and records for each operation that werecombined as the books and records for Center Ranch.The Court also notes that for each of the years in issue petitioner attached tohis return a single Schedule F reporting Center Ranch's income and expenses,which indicated that he considered*256  Center Ranch's operations one activity. Aftera review of all of the facts and circumstances and the factors in the regulations andcaselaw, the Court finds that Center Ranch's cattle, hay, and horse operations wereconducted as a single activity for the years in issue.B. Whether the Activity Was Engaged In for ProfitNow that petitioners' activity for the years in issue has been ascertained, seesec. 1.183-1(d), Income Tax Regs., the Court must decide whether the activity wasengaged in for profit. To decide whether a taxpayer is carrying on a trade orbusiness so that his expenses are deductible under section 162, the Court examineswhether the taxpayer's primary purpose and intention in engaging in the activity isto make a profit. Dreicer v. Commissioner, 78 T.C. 642">78 T.C. 642, 643 (1982), aff'd withoutpublished opinion, 702 F.2d 1205">702 F.2d 1205 (D.C. Cir. 1983). The taxpayer's expectation ofprofit need not be a reasonable one, but merely bona fide. Id.; sec. 1.183-2(a),- 27 -[*27] Income Tax Regs. Whether a taxpayer expects to realize a profit is aquestion of fact and is resolved by examining all of the facts and circumstances ofthe case. Commissioner v. Groetzinger, 480 U.S. 23">480 U.S. 23, 35 (1987); Dreicer v.Commissioner, 78 T.C. at 643-644; sec. 1.183-2(a), Income Tax Regs.The Court examines the facts and circumstances of the case using therelevant nonexclusive factors in section 1.183-2(b), Income Tax Regs.Dreicer v.Commissioner, 78 T.C. at 644. Those factors include: (1) the manner in whichthe*257  taxpayer carries on the activity, (2) the expertise of the taxpayer or hisadvisors, (3) the time and effort expended by the taxpayer in carrying on theactivity, (4) the expectation that assets used in the activity may appreciate in value,(5) the success of the taxpayer in carrying on other similar or dissimilar activities,(6) the taxpayer's history of income or losses with respect to the activity, (7) the amount of occasional profits, if any, which are earned, (8) the financial status of the taxpayer, and (9) whether elements of personal pleasure or recreation are involved. Sec. 1.183-2(b), Income Tax Regs. No one factor is determinative. Id. After a thorough review of the facts and circumstances, the Court finds that Center Ranch was a for-profit activity, and the relevant facts and circumstances will be discussed infra.- 28 -[*28] 1. The Manner in Which the Taxpayer Carries On the ActivityCenter Ranch's activity was carried on in a businesslike manner. Petitionerkept books and records for each of Center Ranch's operations to determine theirincomes and expenses. Indeed, petitioner used resources from his otherendeavors--namely, Welch Consulting--to keep track of such information.Respondent tried to make much of the*258  fact that there were mistakes in petitioner'sbooks and records. The fact that there were some mistakes in the books andrecords of a multimillion-dollar activity does not negate that the activity wascarried on in a businesslike manner.24 Center Ranch also had separate bankaccounts, which is indicative of an activity being carried on in a businesslikemanner. See Wayts v. Commissioner, T.C. Memo 1992-82">T.C. Memo. 1992-82, 63 T.C.M. (CCH)2032, 2034 (1992) (finding horse racing and breeding activity was carried on in abusinesslike manner because it had a separate bank account) (citing Pryor v.Commissioner, T.C. Memo. 1991-109); Hopcus v. Commissioner, T.C. Memo.1988-181, 55 T.C.M. (CCH) 717">55 T.C.M. (CCH) 717, 719 (1988) (finding horse breeding and24Respondent argued that one such mistake--petitioner's inability to allocate overhead costs of each operation--made clear that Center Ranch was not carried on in a businesslike manner. Because the Court finds that Center Ranch's operations were one activity, the allocation of overhead costs between operations, e.g., salaries of ranch hands who worked in both the hay and cattle operations, is of little concern.- 29 -[*29] boarding activity was carried on in a businesslike manner because it had aseparate bank account); cf. Faust v. Commissioner, T.C. Memo 2011-158">T.C. Memo. 2011-158, 102T.C.M. (CCH) 16, 17-18 (2011) (finding horse activity was not carried on in*259  abusinesslike manner because it did not have a separate bank account).Respondent also argued that petitioner had no written business plan forCenter Ranch. The fact that petitioner had no written business plan does notnegate a profit motive. Petitioner's business plan was evidenced by his actions.See Annuzzi v. Commissioner, T.C. Memo. 2014-233, at *16 (stating that writtenfinancial plan not required for 32-horse farm where business plan was evidencedby action (citing Phillips v. Commissioner, T.C. Memo 1997-128">T.C. Memo. 1997-128, 73 T.C.M.(CCH) 2296, 2300 (1997))). Indeed, petitioner did not have a written businessplan for any of his endeavors, many of which have been highly profitable.Petitioner also made changes in the activity when he realized that certainoperations would not be profitable. These changes were business decisions.Petitioner changed Center Ranch's cattle operation three times--from club calves,to purebreeds, to a commercial cattle herd--when he realized that a particular cattleoperation would not be profitable.He also added other operations to Center Ranch when the third-party feesfor those operations became too costly. Petitioner built the vet clinic when he- 30 -[*30] realized he could contract a full-time veterinarian for less than the fees hewas paying to outside veterinarians.*260  He also reduced shipping expenses when headded a trucking operation to Center Ranch to haul his own cattle and hay. Thoseadditional operations required substantial capital investment but also reducedvariable costs; both of those operations also brought more income to Center Ranchbecause their services were offered to third parties for a fee. Center Ranchadvertised its operations and services through its website and its Facebook pageand in online cutting horse directories.Additionally, the Court finds that Center Ranch was operated in abusinesslike manner because of its size and vertical integration. Center Ranchcomprises over 8,700 acres in Leon County, Texas, outside of the town ofCenterville. It was a well-known and well-regarded working ranch that employed25 people full time during the years in issue and hired part-time ranch hands whenneeded. Center Ranch paid some of its employees wages above the county'smedian wage in its effort to retain the best ranch manager, cattle and horsemanagers, horse trainers, and ranch hands in the area.Center Ranch's operations were vertically integrated. The hay operationprovided feed to the cattle and horse operations. The cattle operation provided*261 calves to the cutting horse operation for training. The vet clinic and trucking- 31 -[*31] operation provided necessary services to Center Ranch and to outside partiesfor a fee. The integration of all of Center Ranch's operations came about aspetitioner decided how to operate the ranch more efficiently and to bring inadditional income. All of these decisions were business decisions and were notmerely made on the basis of petitioner's whim or fancy.This factor favors petitioner's argument that Center Ranch was a for-profitactivity for the years in issue.2. Expertise of the Taxpayer or His AdvisersPetitioner has been involved with agriculture since his middle school daysand with agricultural economics since college. His time in agricultural pursuitsalone would give him the professional expertise necessary to oversee a workingranch. Petitioner also subscribed to 20 professional journals that discussedranching, cattle, and horses. Petitioner hired professionals to manage CenterRanch and contracted with professionals to train its horses, having as many as fivemanagers and trainers during any of the years in issue. Additionally, petitionerhad licensed veterinarians at Center Ranch. A profit*262  motive may be indicated if ataxpayer "employs competent and qualified persons to carry on the activity." Sec.1.183-2(b)(3), Income Tax Regs.- 32 -[*32] The ranch manager had been involved with ranching almost his entireprofessional career, and petitioner contracted with the top two cutting horsetrainers in the country to train Center Ranch's cutting horses. When petitionerdecided to raise purebred cattle on Center Ranch, he hired a cattle manager whowas familiar with purebred stock. When petitioner decided, for business reasons,to change the makeup of his cattle herd, he discharged the purebred cattle managerbecause his expertise was no longer needed. Petitioner then hired a cattle managerfamiliar with managing a commercial cattle herd. Petitioner consistentlysurrounded himself with competent managers, trainers, and ranch hands so thatCenter Ranch operated in a businesslike manner.This factor favors petitioner's argument that Center Ranch was a for-profitactivity for the years in issue.3. The Taxpayer's Time and Effort Expended in Carrying On the ActivityRespondent argues that petitioner did not spend a significant amount of histime and effort on Center Ranch for it to be a for-profit activity because he wasonly*263  at the ranch on the weekends. Petitioner's weekends at Center Ranch anddaily communications with his ranch managers can be sufficient to demonstrate aprofit motive. See Givens v. Commissioner, T.C. Memo 1989-529">T.C. Memo. 1989-529, 58 T.C.M.- 33 -[*33] (CCH) 255, 259 (1989). Petitioner was at Center Ranch for at least threefull days of each week--Friday, Saturday, and Sunday--for the years in issue.25 Forthe other four days of the week, petitioner was devoting time to Welch Consultingand his other endeavors. That meant petitioner spent slightly less than half of eachweek at Center Ranch. While at Center Ranch petitioner met with the ranchmanager to discuss and visually inspect Center Ranch's operations. He also spokewith the ranch manager daily and with the cattle and horse managers regularly--allof them full-time ranch employees--when away from Center Ranch.Additionally, petitioner employed other full-time and part-time employeesto help operate Center Ranch. During the years in issue there were 25 full-timeemployees and several part-time ranch hands employed at Center Ranch. The full-time employees' annual salaries ranged from $25,000 to $115,000. Theemployment of "competent and qualified persons" to carry on an activity when thetaxpayer's*264  time devoted to the activity is limited can indicate a profit motive. Sec.1.183-2(b)(3), Income Tax Regs.; see Annuzzi v. Commissioner, T.C. Memo.2014-233; McNaught v. Commissioner, T.C. Memo. 1999-25; Dawson v.Commissioner, T.C. Memo 1996-417">T.C. Memo. 1996-417, 72 T.C.M. (CCH) 624">72 T.C.M. (CCH) 624 (1996).25Sundays were generally quiet at Center Ranch. See supra p. 4.- 34 -[*34] Petitioner expended significant time and effort--by himself and through hisemployees--to make Center Ranch a for-profit activity. This factor favors hisargument that Center Ranch was a for-profit activity for the years in issue.4. Expectation That the Activity's Assets May Appreciate"The term 'profit' encompasses appreciation in the value of assets, such asland, used in the activity." Sec. 1.183-2(b)(4), Income Tax Regs. Petitionerargues that he fully expected Center Ranch's land, cattle, and horses to allappreciate and entered into evidence expert witness reports for each.Respondent's only argument is that the land, cattle, and horses would notappreciate as much as petitioner and his experts argue that they would.An expert witness' opinion is admissible if it assists the trier of fact tounderstand the evidence or determine a fact in issue. Fed. R. Evid. 702. TheCourt evaluates an expert's opinion in light of his qualifications and the evidencein the record. See Parker v. Commissioner, 86 T.C. 547">86 T.C. 547, 561 (1986). The Courtmay accept an expert's opinion in its entirety*265  or be selective as to the portions itfinds reliable. See Helvering v. Nat'l Grocery Co., 304 U.S. 282">304 U.S. 282, 295 (1938);Parker v. Commissioner, 86 T.C. at 561-562; Buffalo Tool & Die Mfg. Co. v.Commissioner, 74 T.C. 441">74 T.C. 441, 452 (1980). The Court finds petitioner's realproperty expert witness and his report credible.- 35 -[*35] Respondent and petitioner agree that Center Ranch land was purchased tobe used as working ranch land--not primarily with the intent to profit from itsincrease in value--making the holding of the land and the farming one activity.26Seesec. 1.183-1(d), Income Tax Regs. Respondent disputes petitioner's valuationof Center Ranch land but offers no expert witness of his own.The same is true of petitioner's cattle and horse operations--respondent doesnot dispute that the operations would appreciate, only that petitioner's valuationsare incorrect. While respondent offers no expert witnesses of his own, he iscorrect in part that petitioner's expert witness reports for Center Ranch's horse andcattle operations were valued incorrectly. Both reports included the values ofhorse and cattle that were not a part of Center Ranch's herds during the years inissue. The Court will exclude those values. The Court also finds reliable theexpert witness reports for Center Ranch's cattle and horse operations.Respondent argues that petitioner must*266  have a profit motive that expectsrecoupment of all of Center Ranch's past losses. This expectation is too much.26This does not include the 320 acres of Coker Place Division or the 20 acres in Centerville on which the duplexes were located. Petitioner testified that Coker Place was purchased primarily for investment purposes. Although the Court finds credible petitioner's testimony that the duplexes were used to house ranch hands when necessary, they were also available for rent when no ranch hands were staying there. Therefore, the duplexes had an income stream that was reported separate and apart from the Center Ranch activity.- 36 -[*36] "An overall profit is present if net earnings and appreciation are sufficient torecoup the losses sustained in the 'intervening years' between a given tax year andthe time at which future profits were expected." Helmick v. Commissioner, T.C.Memo. 2009-220, 98 T.C.M. (CCH) 269">98 T.C.M. (CCH) 269, 275 (2009) (citing Bessenyey v.Commissioner, 45 T.C. 261">45 T.C. 261, 274 (1965), aff'd, 379 F.2d 252 (2d Cir. 1967)).Therefore, the question is not whether petitioner would recoup all of CenterRanch's losses but whether he would recoup the losses between the years in issueand the "hoped-for profitable future." See id. The Court finds that petitioner'sexpectation of an overall profit*267  could be realized with the expectation of theappreciation of Center Ranch assets and the value of capital improvements madeon Center Ranch lands.The Court finds that this factor favors petitioner's argument that CenterRanch was a for-profit activity during the years in issue.5. The Taxpayer's Success in Carrying On Similar or Dissimilar ActivitiesPetitioner has been successful in other professional areas. He built WelchConsulting into a multimillion-dollar consulting firm and was an economicsprofessor for 40 years, teaching at more than one esteemed university. He alsowas a partner in a successful software company and incorporated a research- 37 -[*37] corporation, of which he is still a manager. In his other professionalpursuits, petitioner has also made changes and adaptations when needed forbusiness reasons, even ending one pursuit altogether when it was apparent that itwould not be profitable. While petitioner has been successful in other endeavors,there is little interplay between his consulting and software businesses and hisranch activity. See Annuzzi v. Commissioner, T.C. Memo 2014-233">T.C. Memo. 2014-233.Because petitioner's success was in dissimilar activities, the Court finds thisfactor to be neutral.6. The Taxpayer's History of Income*268  and Losses With Respect to the Activity and the Amount of Occasional Profits, If Any, Which Are EarnedThe parties agree to, and therefore did not brief, the facts that petitionerderived no occasional profits from Center Ranch and that it had reported losses forevery year in issue. Although it was not briefed by the parties, a short discussionof Center Ranch's gross income and losses is pertinent.Center Ranch generated millions of dollars of gross income for each year inissue. Indeed, Center Ranch's income has increased almost every year of itsexistence. But the steady increase in expenses and in capital investmentaccompanying this steady income growth has resulted in yearly losses.- 38 -[*38] Nevertheless, the years in issue included the startup phases of both the horseoperation and the cattle operation, which is discussed in more detail infra.The startup phase for a horse-related activity is 5 to 10 years. Engdahl v.Commissioner, 72 T.C. 659">72 T.C. 659, 669 (1979). Additionally, horse breeding andperformance are speculative activities, with the opportunity for substantial incomeat every competition or purchase of the right stallion for breeding. See Chandlerv. Commissioner, T.C. Memo. 2010-92, 99 T.C.M. (CCH) 1376">99 T.C.M. (CCH) 1376, 1379 (2010),aff'd, 481 F. App'x 400 (9th Cir. 2012); see also Dawson v. Commissioner*269 , 72T.C.M. (CCH) at 627 (finding that a taxpayer's belief that a champion horse couldgenerate substantial profits supported the existence of a profit motive). Althoughpetitioner purchased his first cutting horses in 1999, those horses were notpurchased to show or breed. It was not until 2001 that petitioner purchased hisfirst cutting horse to be shown. He began construction of Center Ranch's horsecenter and vet clinic in 2003. Petitioner testified that he did not shift CenterRanch's focus to cutting horses until 2004, and it was not until 2006 that hepurchased his first stallion for breeding. Petitioner did not purchase Woody BeTuff, a major cutting horse stallion, to breed until 2008, one of the years in issue.The parties stipulated that it takes five to six years to have credibleinformation about a stallion's breeding capabilities; thus during the years in issue,- 39 -[*39] Woody Be Tuff's breeding capabilities were speculative. Indeed, Woody BeTuff's breeding fees steadily increased after the years in issue. In 2013 hisbreeding fee was $2,000 plus a chute fee, and in 2014 it had increased to $5,000plus a chute fee.Although petitioner testified that he did not focus Center Ranch's*270  horseoperation on cutting horses until 2004, the Court finds that petitioner's cuttinghorse operation began in 2003 with the construction of the horse center and vetclinic. See Roberts v. Commissioner, 820 F.3d 247">820 F.3d 247 (7th Cir. 2016) (finding thattaxpayer's for-profit horse activity started with the decision to build a "bigger andbetter horse training facility"), aff'g in part and rev'g in partT.C. Memo 2014-74">T.C. Memo. 2014-74.Additionally, Center Ranch's prize winnings from showing its horses increasedfrom a little more than $19,000 in 2007 to over $61,000 in 2010. All of the yearsin issue--2007, 2008, 2009, and 2010--fall within the usual startup phase for ahorse operation.27 See Engdahl v. Commissioner, 72 T.C. at 669. In this highly27Respondent argues that it is not possible to have a profit motive when generating millions of dollars of losses. Because the Court finds that the horse operation was in its startup phase during the years in issue, it need not address at length respondent's argument. But the Court will note that a taxpayer's suffering years of multimillion-dollar losses beyond an activity's startup phase does not bar a profit motive. See, e.g., Metz v. Commissioner, T.C. Memo 2015-54">T.C. Memo. 2015-54.- 40 -[*40] speculative activity, petitioner is slowly and steadily working towards ahighly profitable cutting horse operation.The Court finds that*271  petitioner began his commercial cattle operation in2006. Although Center Ranch had previously operated club calf and purebredcattle operations, both of those operations--most notably the purebred operation--were more labor and time intensive than petitioner intended. Indeed, petitionercredibly testified that artificially inseminating the purebred heifers requiredextensive individual time and attention for each of the animals and obligated toomuch of his ranch hands' time. Center Ranch's wholesale change to a new type ofcattle operation restarted the clock for the startup period for that operation. Cf.Mathis v. Commissioner, T.C. Memo. 2013-294 (finding that a change in focus tobreeding from training cutting horses did not amount to a new activity). Thechange to a new type of cattle operation was a business decision that required anew cattle manager and a complete turnover of Center Ranch's cattle herd.Therefore, Center Ranch's commercial cattle operation was also in its startupphase. See Burrus v. Commissioner, T.C. Memo 2003-285">T.C. Memo. 2003-285, 86 T.C.M. (CCH)429, 438 (2003) (finding that losses incurred in the first six years of a cattleactivity were during the startup phase of the activity (citing Fields v.Commissioner, T.C. Memo. 1981-550)).- 41 -[*41] Although Center Ranch has sustained continued*272  losses and had nooccasional profits, the years in issue were during both the cattle and horseoperations' startup phases. Therefore, the Court finds that the activity's history ofincome and losses and the amount of occasional profits, if any, favor respondent,but it will not give these factors as much weight because the cattle and horseoperations were in their startup phases during the years in issue.7. The Taxpayer's Financial Status and Elements of Personal Pleasure and RecreationPetitioners did have substantial wealth and financial resources not related toCenter Ranch. Indeed, petitioner contributed over $9 million of his own moneyfor Center Ranch's capital. But wealth not associated with the activity in issue isnot a bar to that activity's being engaged in for profit. See Blackwell v.Commissioner, T.C. Memo. 2011-188, 102 T.C.M. (CCH) 137">102 T.C.M. (CCH) 137, 143 (2011).Additionally, the receipt of tax benefits standing alone does not establish the lackof a profit motive. See Engdahl v. Commissioner, 72 T.C. at 670. This, coupledwith the fact that the injuries petitioner sustained in an automobile accident whenhe was in college substantially restricted his ability to derive personal pleasurefrom Center Ranch's outdoor operations--he performed no manual labor on theranch, did not ride the*273  ranch's horses, and did only a little hunting in the late- 42 -[*42] 1980s--does not impede the Court's finding that Center Ranch was operatedfor profit.The Court finds petitioner's financial status and elements of personalpleasure or recreation to be neutral factors.III. ConclusionAfter a review of all of the facts and circumstances and for the reasonsstated above, the Court finds that petitioner was engaged in Center Ranch as a for-profit activity during the years in issue. In so holding, the Court is not declaringCenter Ranch a for-profit activity ad infinitum. If Center Ranch's future lossescannot be reined in, petitioner may again find his profit motives before this Court.The Court has considered all of the arguments made by the parties, and tothe extent they are not addressed herein, they are considered unnecessary, moot,irrelevant, or without merit.To reflect the foregoing,Decision will be enteredfor petitioners.