                                                          NOT PRECEDENTIAL

                    UNITED STATES COURT OF APPEALS
                         FOR THE THIRD CIRCUIT
                              _____________

                                   No. 15-2196
                                  _____________

                             RAYMOND PRICE, III;
                               LYNN M. PRICE,
                                  Appellants

                                         v.

                 COMMISSIONER OF INTERNAL REVENUE
                           _____________


                   On Appeal from the United States Tax Court
                          Nos. 1:13-4301; 1:13-8470

                Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
                                March 3, 2016

    Before: McKEE, Chief Judge, SMITH, and HARDIMAN, Circuit Judges

                              (Filed: March 7, 2016)
                             _____________________

                                    OPINION
                             _____________________

SMITH, Circuit Judge.

      In a comprehensive memorandum opinion dated December 16, 2014, the


This disposition is not an opinion of the full court and pursuant to I.O.P. 5.7 does
not constitute binding precedent.
United States Tax Court upheld, as explained therein, the tax deficiencies

determined by the Commissioner of the Internal Revenue Service for taxable years

2009 through 2011 against appellants. This timely appeal followed.1 Appellants

contend that the Tax Court erred in finding (1) that their horse farm and

automobile dealership undertakings were not a single activity, and (2) that the

horse farm undertaking was not conducted for profit. We will affirm for the

reasons stated below and for the reasons articulated by the Tax Court in its

December 16, 2014, memorandum opinion.

      “While we conduct plenary review of the Tax Court’s legal conclusions, we

review its factual findings, including its ultimate finding as to the economic

substance of a transaction, for clear error.” Crispin v. Comm’r, 708 F.3d 507, 514

(3d Cir. 2013) (quoting ACM P’ship v. Comm’r, 157 F.3d 231, 245 (3d Cir. 1998)).

“The Commissioner’s deficiency determination is entitled to a presumption of

correctness and . . . the burden of production as well as the ultimate burden of

persuasion is placed on the taxpayer.” Id. (quoting Anastasato v. Comm’r, 794

F.2d 884, 887 (3d Cir. 1986)).       The taxpayer must “prov[e] entitlement to a

claimed deduction by a preponderance of the evidence.” Blodgett v. Comm’r, 394

F.3d 1030, 1035 (8th Cir. 2005); Tax Court Rule 142(a). This burden may shift


1
  The Tax Court had jurisdiction pursuant to I.R.C. §§ 6213(a), 6214, and 7442. We have
jurisdiction over final orders of the Tax Court pursuant to I.R.C. § 7482(a).
                                                 2
back to the Commissioner if the taxpayer introduces credible evidence with respect

to any relevant factual issue and meets other conditions, including maintaining

required records. I.R.C. § 7491(a); Blodgett, 394 F.3d at 1035.

      Treasury    Regulation     1.183-1(d)(1)    states   that   “[g]enerally,   the

Commissioner will accept the characterization by the taxpayer of several

undertakings either as a single activity or as separate activities.” Such deference to

the taxpayer will not be given, however, “when it appears that his characterization

is artificial and cannot be reasonably supported under the facts and circumstances

of the case.” Id. The regulation provides several factors to be considered in

determining whether two undertakings are part of the same activity. As a general

rule, “all the facts and circumstances of the case must be taken into account.” Id.

However, “the most significant facts and circumstances in making this

determination 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.” Id.

      In addition to the factors explicitly listed in Treasury Regulation 1.183-

1(d)(1), courts consider other factors in determining whether the taxpayer’s

characterization is reasonable. These factors are:


                                          3
             (a) [w]hether 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 or records.

Mitchell v. Comm’r, 92 T.C.M. (CCH) 17, *4 (2006). The Tax Court thoroughly

analyzed both the regulation’s enumerated factors and the Mitchell factors, and its

determination that appellants’ horse farm and automobile dealership undertakings

were not part of the same activity is not clearly erroneous.

      Appellants have also failed to show that the horse farm undertaking was

conducted with a profit motive. Treasury Regulation 1.183-2(b) enumerates nine

non-exclusive factors to be considered in determining whether an activity is

conducted for profit: (1) the manner in which the taxpayer carries on the activity;

(2) the expertise of the taxpayer or his advisors; (3) the time and effort expended

by the taxpayer in carrying on the activity; (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 were

earned; (8) the financial status of the taxpayer; and (9) elements of personal
                                          4
pleasure or recreation. Again, “[n]o one factor is determinative in making this

determination,” and all facts and circumstances are to be taken into account. 26

C.F.R. § 1.183-2(b). Again, the Tax Court thoroughly analyzed these factors and

did not commit clear error in determining that the horse farm undertaking was not

conducted with a profit motive.

         For the reasons stated herein, and for the reasons stated in the Tax Court’s

December 16, 2014, memorandum opinion, we will affirm the order of the Tax

Court.




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