Iverson v. Comr., T.C. Memo. 2012-19

(petitioner, controlling owner of MN company with business in many countries and income over several million dollars for years in issue (2005 and 2006) had purchased 14,000-acre Colorado ranch in 1998 which operated total of 42, 000 acres and had 300 head of cattle and 30 horses; petitioner employed ranch manager to carry out day-to-day duties of ranch; ranching activity incurred losses for years in issue and IRS claimed loss deductions limited by passive activity rules; petitioner spent little time at ranch and typically took family with him to ranch on flights paid for by petitioner’s MN company; petitioner claimed that he materially participated in cattle ranching activity by controlling actions of ranch manager and spent over 500 hours on ranching activity for years in issue via phone and electronic transmissions; petitioner could not produce any logs substantiating involvement in ranching activities or phone records; petitioner’s conduct at ranch often affiliated with MN company; ranch essentially a corporate retreat for MN company; petitioner subject to passive activity loss rules and ranching loss deductions denied).

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