IN THE OREGON TAX COURT MAGISTRATE DIVISION Income Tax
TERRY A. DAVIS ) and CHEYLEEN M. DAVIS, ) ) Plaintiffs, ) TC-MD 190099G ) v. ) ) DEPARTMENT OF REVENUE, ) State of Oregon, ) ) Defendant. ) DECISION
This case concerns whether Plaintiffs’ ranching was a for-profit activity generating
deductible business expenses in tax years 2014 and 2015. At trial, Plaintiffs were represented by
Kent J. Bailey, CPA, and both Plaintiffs and Mr. Bailey testified. Defendant was represented by
David Lenhart and did not call any witnesses. Plaintiffs’ Exhibits 1 to 7, 9 to 13, 15 to 18, and
20 were admitted. Defendant’s Exhibits A to F were admitted.
I. STATEMENT OF FACTS
During the years at issue, Plaintiffs lived, grew hay, and leased pasture at Beaver Creek
Ranch, their 305-acre ranch near Baker City.
Plaintiffs had purchased the ranch in 2010 in fulfillment of a lifelong dream and a 35-
year search. After growing up on farms in Michigan and attending college there, they moved to
Oregon in 1974. (Ex 1 at 1.) Plaintiffs began looking for a ranch immediately, but could not
afford to buy one at that time. In 1979 they bought five acres of bull pasture near Sumpter for
$15,000 with the intention of building a house, selling it, and using the proceeds of the sale to
buy a ranch. (Id.) Plaintiffs eventually built a log house on the Sumpter property without
borrowing any money. (Ex 12 at 2–6.) Plaintiffs performed essentially all the work themselves,
DECISION TC-MD 190099G 1 of 14 with Mr. Davis designing and building machinery as needed. (Id.) Building began in 1984 and
“took years to finish.” (Id.)
The rising cost of small working ranches led Plaintiffs to remain in Sumpter for many
years. (Ex 1 at 1.) While there, Plaintiffs raised a few calves annually for meat and sale. (Ex 12
at 9–11.) They befriended members of the ranching community—especially their neighbors, the
Warnocks, who introduced them to a small-paddock grazing method they would later use at
Beaver Creek Ranch. (Id. at 13–14.) All the while, Plaintiffs supported themselves through their
other occupations: Mrs. Davis taught Biology at Baker Middle School, and Mr. Davis became an
internationally recognized craftsman of folding knives. (Id. at 12, 15–20.)
By 2010, an inheritance had made purchasing a ranch feasible. Mrs. Davis had retired
from teaching middle school and was collecting a pension while teaching part-time at the
community college in Baker City. Plaintiffs’ plan was to buy a lower-cost ranch they could then
improve, the way they had improved their land in Sumpter. (Ex 1 at 1.) They found such a
ranch at Beaver Creek, eight miles outside of Baker City.
They bought Beaver Creek Ranch in March 2010 for $400,000 without equipment. (Exs
7 at 2; 1 at 2.) It was “rundown with an outdated ditch irrigation system” and a nonpaying tenant
residing at the ranch house. (Ex 7 at 2.) The fences, irrigation system, and house were all in
disrepair. (Ex 1 at 2.)
Upon purchasing the ranch, Plaintiffs immediately began reestablishing irrigation and
removing weeds, harvesting their first crop of hay that year. They also began building and
rebuilding fences in anticipation of grazing, which began in 2011. Tending to weeds and
irrigation would be a constant concern of theirs going forward. In 2011, Plaintiffs dug a well and
began building a shop. (Id. at 3.) In 2012, their tenant left and they began cleaning out the ranch
DECISION TC-MD 190099G 2 of 14 house. Mr. Davis ceased making custom knives, devoting his full efforts to the ranch. (Ex 12 at
15.) In 2014, final interior work on the shop was completed, and Plaintiffs moved the contents
of their Sumpter shop to the new shop at Beaver Creek Ranch. (Ex 1 at 4.) In 2015, Plaintiffs
sold their Sumpter home for $250,000 and were living in the ranch house at Beaver Creek. By
then, Mrs. Davis had retired from teaching at the community college, and both Plaintiffs were
ranching exclusively.
From 2010 to 2016, Plaintiffs spent $87,301 on ranch equipment. (Ex 11 at 1.) Plaintiffs
already had a tractor they had bought while living in Sumpter. (Id.) They made several
equipment purchases shortly after purchasing the ranch, most notably a backhoe and a dump
truck. (Id.) In 2012, they bought a mower and a baler for harvesting hay, as well as a second
tractor. (Id.) 2014 and 2016 saw further major purchases of a skid steer and a no-till drill. (Id.)
Plaintiffs generally bought “old repairable equipment” to reduce costs; their backhoe was a 1973
model, and their second tractor was a 1953 model. (Ex 13 at 21.)
Plaintiffs’ ranch generated income from hay sales and from leasing pasture for cattle
grazing. Plaintiffs reported operating expenses for several items, the largest of which were
repairs, vehicles, supplies, equipment rental, fuel, taxes, custom hire for hay-cutting, and utilities.
(Ex 10 at 1.) Plaintiffs also reported depreciation expenses from their equipment purchases. The
following chart summarizes Plaintiffs’ reported revenue and expenses through 2018:
Revenue Operating Expenses Depreciation 2010 $3,855 $25,087 $42,442 2011 $4,780 $37,719 $28,879 2012 $2,553 $23,808 $26,709 2013 $2,136 $23,192 $28,161 2014 $4,615 $21,486 $29,025 2015 $3,837 $26,790 $22,538 2016 $4,443 $24,408 $23,201 2017 $6,693 $15,069 $21,732 2018 $6,349 $12,788 $9,407
DECISION TC-MD 190099G 3 of 14 (Ex 10 at 1; Ex D at 1.) A number of factors affected the ranch’s revenue and expenses over the
years. Expenses spiked in 2011 due to the repair bill for one machine; thereafter, Mr. Davis
began repairing the ranch equipment himself to save costs. In 2012, much of the hay crop was
lost because Plaintiffs’ custom hire was unavailable; to prevent a reoccurrence, Plaintiffs
purchased their own baler. In 2013, severe drought conditions reduced the yield of hay. (Ex 1 at
7.) In general, Plaintiffs’ improvements to the irrigation system and fencing tended to increase
the yield and quality of hay, as well as the length of time cattle could graze. Plaintiffs charged
market prices for their hay and pasture, which were of high quality.
Plaintiffs count the increase in the value of the ranch as additional “economic income.”
(Ex 10 at 1.) A Baker City broker prepared a competitive market analysis recommending a list
price of $664,488 for the ranch as of January 22, 2018. (Ex 6 at 10.) After subtracting the costs
they incurred for the new well, fence, and shop, Plaintiffs calculate the ranch appreciated an
average of 3.7 percent per year between 2010 and 2018. (Ex 18 at 1.) Distributing the gain over
that period, Plaintiffs count annual “economic income” rising steadily from $14,800 in 2010 to
$23,591 in 2018. (Ex 10 at 1.)
Plaintiffs’ plan to eventually sell the ranch when they are no longer able to operate it
themselves, perhaps in eight or nine years. As was the case in Sumpter, they expect the labor
they have invested in their property will result in its increasing in value. Including both revenue
and ranch appreciation as “economic income,” Plaintiffs show generally diminishing losses from
2010 to 2017 and a net gain of $7,745 in 2018 after subtracting expenses and equipment
depreciation. (Ex 10 at 1.) They anticipate somewhat larger gains in years to come through
sales of excess equipment, increased return on hay, and reduced expenses. (Id. at 2.)
A few additional details are included where pertinent in the analysis below.
DECISION TC-MD 190099G 4 of 14 Plaintiffs claimed their operating expenses and depreciation as Schedule F farming loss
on their 2014 return, which Defendant disallowed in its Notice of Deficiency, issued January 4,
2018. (Exs 19 at 2, 8; A at 1.) Defendant sustained its 2014 adjustment at conference. (Ex B.)
Plaintiffs similarly claimed Schedule F losses on their 2015 return, which Defendant disallowed.
(Exs E at 5; C.)
On appeal, Plaintiffs ask the court to reverse Defendant’s adjustments and Defendant
asks the court to uphold them.
II. ANALYSIS
At issue is whether Plaintiffs’ ranching was a for-profit activity entitling them to deduct
expenses under section 162 of the Internal Revenue Code (IRC). The IRC applies because
Oregon taxable income is equal to federal taxable income where, as here, no modifications
peculiar to Oregon are relevant. See ORS 316.022(6); 316.048. 1 Plaintiffs, as the parties asking
the court to change the tax assessment, must bear the burden of proof. See ORS 305.427.
IRC section 162(a) allows a deduction for expenses of carrying on a “trade or business,”
and an activity can only be a “trade or business” if the taxpayer engages in it primarily to obtain
income or profit. Commissioner v. Groetzinger, 480 US 23, 35, 107 S Ct 980, 94 L Ed 2d 25
(1987). The expectation of actually making a profit need not be reasonable, so long as profit is
the taxpayer’s “actual and honest objective.” Treas. Reg. § 1.183–2(a); Dreicer v. Comm’r,
78 TC 642, 644–45 (1982), aff’d, 702 F2d 1205 (DC Cir 1983). As is generally the case where a
taxpayer’s qualification for a deduction depends on intent, objective facts are more persuasive
than statements of intent. Treas. Reg. § 1.183–2(a); Hudspeth v. Dept. of Rev., 4 OTR 296, 298–
99 (Or Tax 1971).
1 The court’s references to the Oregon Revised Statutes (ORS) are to 2013.
DECISION TC-MD 190099G 5 of 14 A. Scope of Activity
In order to determine whether an activity is engaged in for profit, it is necessary to
determine what undertakings fall within the scope of a single activity. Treas. Reg. § 1.183–
1(d)(1). Multiple undertakings may constitute one activity or may each be separate activities.
Id. If they are separate activities, the deductions and income from each undertaking are not
aggregated in determining whether each is engaged in for profit. Id.
In determining whether multiple undertakings constitute one activity, the most significant
factors are “the degree of organizational and economic interrelationship of various undertakings,
the business purpose which is (or might be) served by carrying on the various undertakings
separately or together in a trade or business or in an investment setting, and the similarity of
various undertakings.” Treas Reg § 1.183–1(d). Courts have identified additional factors for
consideration. 2
In the case of land being farmed, a question may arise whether the farming and the
holding of the land for appreciation are separate activities. Because farming is closely tied to
land, the economic interrelationship between the two undertakings is often clear. Under certain
circumstances, however, the farming may not contribute to the landowner’s profit objective:
“A typical case would arise when the land value is increasing through urban expansion, creating a demand for land to be used for purposes other than farming. It can be argued that the appreciation will continue whether or not the land is farmed, and thus the profit motive is not in farming, but is in land speculation which should be treated separately from the farming.”
2 For example: “(a) Whether the undertakings are conducted at the same place; (b) whether the undertakings were part of the taxpayer’s efforts to find sources of revenue from his or her land; (c) whether the undertakings were formed as separate businesses; (d) whether one undertaking benefited from the other; (e) whether the taxpayer used one undertaking to advertise the other; (f) the degree to which the undertakings shared management; (g) the degree to which one caretaker oversaw the assets of both undertakings; (h) whether the taxpayer used the same accountant for the undertakings; and (i) the degree to which the undertakings shared books and records.” Mitchell v. Comm’r, 92 TCM (CCH) 17, WL 1867342 at *4 (2006) (holding tree-planting, timber harvesting, and haying were single farming activity).
DECISION TC-MD 190099G 6 of 14 William K. Waugh III, The Effect of Unrealized Appreciation in Determining Profit Motive in
Farming Enterprises, 16 U Kan L Rev 529, 535 (1968) (footnote omitted). Where holding land
and farming it are separate activities, deductions for farming expenses are only allowable if the
farming is intended to realize a profit without regard to gains from land appreciation.
In determining whether farming and holding land are one activity, a threshold
determination must be made whether the “land is purchased or held primarily with the intent to
profit from increase in its value[.]” See Treas. Reg. § 1.183–1(d)(1). If so, “the farming and the
holding of the land will ordinarily be considered a single activity only if the farming activity
reduces the net cost of carrying the land for its appreciation in value.” Id. If not, the taxpayer’s
characterization of the activity is generally accepted. See id. Thus, where land is purchased or
held for speculative purposes, its being farmed is not part of that profit-seeking activity unless
farming income exceeds farming deductions. Id. On the other hand, where land is purchased to
be farmed, the holding of the land and the farming of it are one activity, even where the land
appreciates while the farming results in a net loss. See id.; Engdahl v. Comm’r, 72 TC 659, 668
n 4 (1979) (so concluding where taxpayers purchased property primarily for horse-breeding
activity); Welch v. Comm’r, 114 TCM (CCH) 578, WL 5624726 at *12 (2017) (so concluding
where parties agreed “land was purchased to be used as working ranch land”).
In the present case, the court finds that Plaintiffs purchased Beaver Creek Ranch as a
working ranch. That was their credible testimony, to which Defendant offered no rebuttal. Such
an intention is consistent both with Plaintiffs’ personal history, which shows a longstanding
interest in working the land rather than speculating to make a profit, and with Plaintiffs’ course
of conduct after purchasing the ranch. In addition, the factors present in the typical case of land
speculation—population growth increasing demand for land for nonfarming purposes—appear to
DECISION TC-MD 190099G 7 of 14 be lacking eight miles outside of Baker City. 3 There is no dispute that Plaintiffs’ haying and
pasture-leasing undertakings were parts of a single farming activity. Because farming was
Plaintiffs’ purpose in owning the ranch, holding the land was also part of that activity. See
Welch, 2017 WL 5624726 at *12. The land’s appreciation in value should therefore be
considered when evaluating whether Plaintiffs farmed for profit.
B. Profit Intent
The Treasury Regulations provide a nonexclusive list of nine factors that have proven
helpful in distinguishing “activity deliberately and conscientiously pursued for profit.” Hillenga
v. Dept. of Rev., 21 OTR 396, 405 (2014), aff’d in part, rev’d in part on other grounds, 358 Or
178, 361 P3d 598 (2015). The nine factors are: (1) the manner in which the taxpayer carries on
the activity; (2) the expertise of the taxpayer or the taxpayer’s advisors; (3) the time and effort
expended by the taxpayer in carrying on the activity; (4) expectation that assets used may
appreciate in value; (5) the taxpayer’s success in carrying on other activities; (6) the taxpayer’s
history of income or losses with respect to the activity; (7) the amount of occasional profits
earned; (8) the taxpayer’s financial status; and (9) elements of personal pleasure or recreation.
Treas Reg § 1.183–2(b). The factors are not to be applied formulaically—it is not a question of
counting up factors for and against. Id.; Treas Reg § 1.183–2(b).
1. Factors
As is typical, the present case presents several factors that are suggestive, but not
dispositive. With respect to the factor 1, Plaintiffs showed willingness to make changes to
3 The court takes judicial notice that the United States Census reports the 2010 population of Baker City was 9,828 and the 2010 population of all Baker County was 16,131. As of July 1, 2018, the populations of both areas were estimated to have declined slightly from their 2010 levels.
https://www.census.gov/quickfacts/fact/table/bakercitycityoregon,bakercountyoregon/PST045219
DECISION TC-MD 190099G 8 of 14 improve the ranch’s efficiency, such as creating additional pastures and irrigation systems,
personally repairing their equipment, and purchasing a baler. Their business plan and
recordkeeping were rudimentary, but probably sufficient for the simplicity of their operation.
Regarding factor 2, Plaintiffs demonstrated expertise in ranching and in general problem-solving,
as well as willingness to consult with others. Regarding factor 3, Plaintiffs devoted their
principal efforts to ranching, both of them retiring from other employment to do so. Each of
those three factors would be consistent with either a profit motive or with Plaintiffs’ being retired
hobbyists. As to factor 9, Plaintiffs’ evident satisfaction with their ranching lifestyle provides
little ground for suspecting their intent. This is not a case where a taxpayer asserts an activity
usually thought of as recreational is a business. Standing alone, “the fact that the taxpayer
derives personal pleasure from engaging in the activity is not sufficient to cause the activity to be
classified as not engaged in for profit.” Treas Reg § 1.183–2(b)(9).
Regarding factor 8, Plaintiffs had sufficient income to support themselves and cover their
losses, suggesting they had no need to profit from ranching and could receive a tax benefit from
ranching expenses. However, there is evidence that Plaintiffs placed a high value on staying out
of debt. 4 Plaintiffs could hardly begin farming without debt unless they had achieved some
financial stability. Their financial position is consistent with their stated reasons for waiting so
long to begin ranching.
Regarding factors 6 and 7, Plaintiffs had never turned a profit as of the years at issue and
had a long history of farming losses exceeding farming income. However, the interpretation of
that history depends a great deal on the extent to which Plaintiffs expected gain from the
4 The title of their mentor’s book is “You Can’t Borrow Yourself Rich.” (Ex 12 at 13.) Plaintiffs lived out that philosophy at Sumpter before purchasing the ranch, preferring to build their own log house rather than take out a mortgage.
DECISION TC-MD 190099G 9 of 14 appreciation of their land, the subject of factor 4.
In considering factor 4, the appreciation of Plaintiffs’ land should be included because
Plaintiffs’ ranching activity included holding the land, as discussed above. Plaintiffs’ unrebutted
evidence showed the land appreciating at an average of 3.7 percent per year during the period at
issue. That increase in value—presumably at least partly due to Plaintiffs’ work irrigating,
establishing new pastures, and otherwise operating the ranch—counterbalanced an increasing
proportion of Plaintiffs’ yearly operating expenses and eventually exceeded expenses in
subsequent years.
2. Recoupment of Losses
Defendant argues that factor 4 does not favor Plaintiffs because they are unlikely to
recoup prior years’ losses, even if asset appreciation begins covering their operating expenses.
By Plaintiffs’ accounting, their net “economic” losses totaled over $200,000 by the years at
issue, even factoring in land appreciation. (Ex 10 at 1.)
The question of whether taxpayers should be expected to recoup prior years’ losses to
show profitability has received different answers in two lines of U.S. Tax Court cases. Both
lines may be traced back to Bessenyey v. Commissioner, 45 TC 261 (1965), aff’d, 379 F2d 252
(2d Cir 1967). In Bessenyey, the court evaluated the profit objective of a Hungarian émigrée
who bred and trained horses of a blood line native to her homeland. Noting that large initial
losses in a business are “not inconsistent with an intention to achieve a later profitable level of
operation,” the court observed that “the goal must be to realize a profit on the entire operation,
which presupposes not only future net earnings but also sufficient net earnings to recoup the
losses which have meanwhile been sustained in the intervening years.” 45 TC at 274.
Ultimately, the court found that the taxpayer lacked the requisite profit objective. Id. at 275.
DECISION TC-MD 190099G 10 of 14 The Second Circuit affirmed because the trial court’s decision was not clearly erroneous, but
Judge Friendly observed that the lower court’s ultimate finding of fact would be out of line with
“a curve plotted through the irreconcilable body of cases in this general area[.]” 379 F2d at 256.
In one line of subsequent cases, courts have cited Bessenyey as requiring the taxpayer’s
projected asset appreciation be sufficient to recoup losses from prior years. See, e.g., Golanty v.
Comm’r, 72 TC 411, 427 (1979), aff’d, 647 F2d 170 (9th Cir 1981) (finding no profit where
appreciated total value of horses fell far below seven years’ increasing losses totaling $129,552).
persuasive of no profit objective where horses ); Hillman v. Comm’r, 78 TCM (CCH) 210 (1999)
(finding no profit objective where horse appreciation fell “significantly short” of accumulated
losses and rate of losses outstripped rate of appreciation in succeeding years); Bronson v.
Comm’r, 103 TCM (CCH) 1112 (2012), aff’d, 591 Fed Appx 625 (9th Cir 2015) (finding no
profit objective where “the appreciation in the horses would recoup no more than a fraction of
the $837,752 in cumulative losses”).
Another line of cases interprets the “intervening years” mentioned in Bessenyey as
referring to the time period between the year at issue and the projected date of future
profitability. The reasoning underlying these cases is found in Helmick v. Commissioner,
98 TCM (CCH) 269 (2009), wherein the court criticized the position that “the requisite profit
motive as of any given year must involve an expectation that even all past losses will be
recouped, so that the activity will have generated a net profit over its entire course.” The court
reasoned by way of a hypothetical:
“If a natural disaster caused the death of 90 percent of a rancher’s herd and resulted in a catastrophic loss that could never be recouped, but the rancher thereafter expected to generate an overall prospective profit by breeding and selling the remaining 10 percent of his herd on a foregoing basis, then he could not be said to lack a profit objective after the disaster merely because he would never recoup the prior loss. * * *.”
DECISION TC-MD 190099G 11 of 14 Helmick, 2009 WL 3012725 at *10 (finding appreciation of horse herd and maintenance of
ranch’s “equestrian center” zoning status weighed in favor of profit objective despite
accumulated prior years’ losses over $400,000). In other words, “if a taxpayer can expect to
generate an overall profit from the current year onward, then it can’t be said that he lacks a profit
objective simply because he will never generate an overall profit over the lifetime of the
activity.” Metz v. Comm’r, 109 TCM (CCH) 1248 (2015) (finding asset appreciation factor
neutral without regard to $20 million in prior years’ accumulated losses); see also Welch, 2017
WL 5624726 at *35–*36; Robison v. Comm’r, 115 TCM (CCH) 1501 (2018) (finding asset
appreciation factor neutral where evidence insufficient to determine current value of taxpayers’
basis in ranch property).
No cases citing Helmick have disagreed with its reasoning on recoupment of prior years’
losses, and this court finds that reasoning persuasive. The pertinent question under IRC section
183 is whether a taxpayer has a profit intent in a given year. Prior years’ accumulated losses
may certainly indicate lack of profit objective in prior years and, if a taxpayer takes no steps to
improve matters, in subsequent years as well. Cf. Golanty, 72 TC at 428 (finding taxpayer’s
subsequent act reducing number of broodmares had “reduced the chances of the operation
breaking even”). But where a taxpayer has made efforts to correct course and achieve future
profitability, losses which can no longer be helped do not set a baseline that must be reached to
have a current profit objective.
Here, Plaintiffs’ prior years’ losses had several causes, including startup costs for
equipment, inefficient irrigation and use of pasture, and severe drought conditions in 2013.
Plaintiffs took steps to remedy those causes insofar as they were able up to and through the years
at issue. In evaluating whether ranch appreciation would allow them to recoup their losses, the
DECISION TC-MD 190099G 12 of 14 court considers only their losses beginning in 2014. See Helmick, 2009 WL 3012725 at *10.
The share of the ranch’s appreciation attributable to 2014 and 2015 came within $2,000
of Plaintiffs’ total net operating income over that period, and appreciation exceeded net operating
income thereafter. It seems clear Plaintiffs expected to recoup their operating expenses going
forward.
Plaintiffs concede some allocation should have been made in the accounting for the
contributory value of the old ranch house to the property’s total appreciation, although
Mr. Bailey testified the amount would not change the overall trend toward profitability. Mr.
Bailey’s opinion is supported by evidence that Plaintiffs place little value on the house—they
have recently begun building a new house and intend to use the old one as a plant shed.
Defendant offered no rebuttal testimony or evidence.
Plaintiffs claimed additional losses from equipment depreciation in 2014 and 2015. At
trial, Plaintiffs argued the depreciation expenses would be largely recaptured upon sale. They had
purchased old equipment on the used market, repaired it themselves, and expected to recoup large
portions of their original purchase prices. Plaintiffs provided an inventory stating each piece of
equipment’s cost and fair market value as of January 2018, amounting to approximately 80 percent
of total cost. (Ex 11 at 1.) Although Defendant did not challenge Plaintiffs’ figures, the evidence
on which Plaintiffs based them was not provided, and the court is in no position to value Plaintiffs’
equipment. However, there was apparently an active market for used equipment, with Plaintiffs’
buying operable, decades-old farm machinery. Given Plaintiffs’ overall credibility, the court finds
it probable they expected to recoup a significant portion of their equipment expenses.
All told, factor 4 supports Plaintiffs’ case. The appreciation of the ranch, together with
ranch revenue and Plaintiffs’ expectation of recouping used equipment costs, show a path to
DECISION TC-MD 190099G 13 of 14 profitability that Plaintiffs could credibly intend to follow.
Regarding factor 5, Plaintiffs’ personal history shows confidence that by working hard and
solving problems they can make something valuable. They made a beautiful home out of bull
pasture in Sumpter. Mr. Davis made world-class folding knives. In each case, their planning and
labor transformed low-cost materials into something for which others were willing to pay a
significantly higher price. It is probable they believed their hard work at Beaver Creek Ranch
would similarly pay off in the end.
Absent any rebuttal from Defendant, the evidence shows Plaintiffs had “the actual and
honest objective of making a profit.” See Dreicer, 78 TC at 644–45. It is immaterial whether
Plaintiffs’ hope for profit was reasonable; their intent qualifies their ranching expenses as
business expenses. See Treas Reg § 1.183–2(a).
III. CONCLUSION
Plaintiffs’ ranching activity was a “trade or business” for which they were entitled to
deduct expenses under IRC section 162(a). Now, therefore,
IT IS THE DECISION OF THIS COURT that Plaintiffs’ appeal is granted.
Dated this ____ day of April 2020.
POUL F. LUNDGREN MAGISTRATE
If you want to appeal this Decision, file a complaint in the Regular Division of the Oregon Tax Court, by mailing to: 1163 State Street, Salem, OR 97301-2563; or by hand delivery to: Fourth Floor, 1241 State Street, Salem, OR.
Your complaint must be submitted within 60 days after the date of this Decision or this Decision cannot be changed. TCR-MD 19 B.
This document was signed by Magistrate Poul F. Lundgren and entered on April 8, 2020.
DECISION TC-MD 190099G 14 of 14