                        T.C. Memo. 1996-66



                      UNITED STATES TAX COURT



       GERALDINE H. PEARSON, Petitioner v. COMMISSIONER OF
                   INTERNAL REVENUE, Respondent



        Docket No. 14580-92.      Filed February 20, 1996.



     Marc K. Sellers, for petitioner.

     Ann M. Murphy, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION

     COLVIN, Judge:   Respondent determined deficiencies in

petitioner's Federal income tax of $2,681 for 1988, $5,338 for

1989, and $4,071 for 1990, and additions to tax of $134 for 1988

for negligence under section 6653(a) and $770 for 1989 and $574

for 1990 for failure to timely file under section 6651(a).
                                 - 2 -

     After concessions,1 the sole issue for decision is whether

petitioner operated her farm with an actual and honest profit

objective in 1988, 1989, and 1990.       We hold that she did not.

     Section references are to the Internal Revenue Code in

effect for the years in issue.    Rule references are to the Tax

Court Rules of Practice and Procedure.

                         FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

A.   Petitioner

     Petitioner lived in Oregon City, Oregon, when she filed her

petition.   Petitioner's parents and grandparents were farmers.

Petitioner is experienced and knowledgeable about farming.

She learned how to handle farm animals and equipment and how to

ride and show horses competitively when she was a teenager.       At

age 14, petitioner was designated to manage her family's farm

while her father served in World War II.       Petitioner has lived on

a farm since 1949.   Petitioner qualified and was nominated for

the American Olympic Equestrian Team in 1952.

     Petitioner graduated from the University of Oregon in 1953.

She taught riding and philosophy in Pennsylvania from 1953 to

1955.   Petitioner worked on a Montana cattle ranch during part


     1
       Petitioner conceded that she is not entitled to deduct
$5,475 for employee business expenses that she claimed on her
1988 return. Respondent conceded that petitioner is not liable
for additions to tax under sec. 6651 for 1989 and 1990 or under
sec. 6653(a) for 1988.
                               - 3 -

of 1955.   From 1955 to 1959, she held short-term or part-time

positions with several employers including KGON radio, H. Richard

Sellars Advertising, BG Record Distributors, White Stag

Manufacturing, Hood River Distillers, and Enterprise Courier.

     Petitioner has raised livestock since 1955.    From 1955 to

the time of trial, petitioner's farm activities included caring

for cattle and sheep and breeding, showing, and selling horses.

     Petitioner's farm consists of her parents' 47.6 acre farm,

which they gave her in 1976, 100 acres petitioner bought in 1961,

which adjoin her parents' farm, and 3 acres petitioner has leased

since 1986.   Petitioner used the 150.6 acres as a farm from 1986

until the time of trial.   The farm consists entirely of pasture

land.   Petitioner’s farm is in Oregon City, Oregon.

     Petitioner taught at Mt. Angel College from 1959 to 1969 and

at Portland Community College from 1969 to 1986.    During the

first years petitioner taught 6 hours per week.    After several

years of teaching, petitioner did special projects at home or at

other locations not disclosed in the record.   In 1971 or 1972,

petitioner had a 180-day contract as a member of the staff of the

president of Portland Community College.

     In 1986 and 1987, petitioner took a leave of absence from

teaching to pursue graduate work at Oregon State University.

Petitioner lived on her farm and commuted 2 days each week to

school. Petitioner spent 1 year on her farm writing her
                                - 4 -

dissertation.    Petitioner has never employed anyone to help her

with the farm.

     Petitioner has managed horse shows and trials, worked on

farms in Oregon and Montana, acted as an agent in the sale of

cattle, sheep, and horses, managed a 2,000-head experimental goat

herd for the Oregon Health Sciences Center, and raised and sold

horses to the American Olympic Team.

     Petitioner decreased her cattle and sheep holdings in 1985

because market conditions were poor.    She expanded her operations

in 1988 to include horticultural products.    There are two houses

on petitioner's farm.    Petitioner lived in one and rented the

other to Carl Schaeffer (Schaeffer) in 1988.    Schaeffer was not a

farmer.   Schaeffer lived at the house for less than 1 year.

     During the years in issue, petitioner had about 150 sheep,

20 to 25 head of cattle, and 40 tons of hay on her farm.

Petitioner kept 8 to 10 horses on the farm for breeding.

Petitioner worked full time on her farm during academic breaks

and summers.    During the school year, petitioner did farm work

mornings and evenings during the week and all day on weekends.

Petitioner cut, raked and bailed hay, hauled manure, reseeded

pastures, trimmed, weeded, sprayed, irrigated, maintained the

barn, repaired buildings and fences, bought and sold hay and

grain, and cultivated.    Petitioner also fed, castrated, docked,

inoculated, trained, marketed, shipped, and sold her livestock.
                                - 5 -

B.   Petitioner's Employment in Virginia

     In June 1988, petitioner signed a 5-year contract to serve

as headmistress of the Foxcroft Girls' Academy (Foxcroft) in

Middleburg, Virginia.    At that time petitioner intended to remain

in Virginia for 5 years.

     Before leaving for Foxcroft, petitioner entered into an oral

contract with Jan Stockfleth (Stockfleth).    Stockfleth owned a

farm in Canby, Oregon.   Stockfleth agreed to supervise and

maintain petitioner's livestock operation.    Petitioner agreed to

give Stockfleth the hay, the proceeds of the wool crop, and one-

half of the proceeds of the lamb crop.     Petitioner received the

other half of the proceeds of the lamb crop.    Petitioner agreed

to pay any extraordinary expenses such as veterinary bills.

Petitioner did not agree to pay Stockfleth a salary or fee.

Stockfleth, however, billed petitioner $1,740.63 for her

services.   Petitioner paid this amount.

     Stockfleth visited petitioner's farm twice a week while

petitioner was in Virginia.   During lambing season, Stockfleth

or her daughter visited petitioner's farm every day.

     Other friends and neighbors of petitioner also helped or

were available to help with the farm if there were any

emergencies.   Darrel Terry, a neighboring farmer, was available

for emergency assistance for the cattle.    Terry Tosney, a

neighboring farmer, was available to help with the sheep.

Elizabeth Dixon (Dixon), a friend, cared for the horses.
                                - 6 -

Petitioner called Dixon a couple of times from Virginia to

discuss the farm.    Petitioner called the people responsible for

her farm at least twice a week while she was in Virginia.

     Petitioner sold a horse named Fraulein Oneonta for $1,200

to an Oregon buyer in June 1988.    Petitioner began working at

Foxcroft on July 1, 1988.    Petitioner left some unmarketable

horses in Oregon and took four horses to Virginia.    Petitioner

intended to have the horses she left behind shipped to her to

sell after they attained marketable age.

     Petitioner was injured in September 1988.    She suffered from

reflex sympathetic dystrophy and could not complete her duties

as headmistress of Foxcroft.    In January 1989, the Foxcroft board

of directors relieved petitioner of her position.    Petitioner

entered into a termination agreement with Foxcroft on

February 12, 1989.

C.   Petitioner's Post-Foxcroft Activities

     Petitioner lived at Salem Farm in Upperville, Virginia, from

March to May 1989.   Petitioner went to her farm in Oregon twice

between January and May 1989.

     In May 1989, petitioner permanently returned to her farm.

Petitioner gave two horses to Gerth Christensen (Christensen) in

August 1989.   The record does not indicate why petitioner gave

the horses to Christensen.

     From 1990 until the time of trial petitioner received

pension payments, completed some consulting contracts, and taught
                                            - 7 -

   some classes.         Petitioner bought equipment to help her avoid

   injury from her physical condition.                  Petitioner made capital and

   fencing improvements, cared for cattle and sheep, marketed

   horses, and expanded operations to include horticultural

   products.        Petitioner suffered unexpected losses during the years

   in issue including theft of livestock, a decline in the sheep

   market, and unanticipated repairs.               Petitioner's farm was

   producing cattle, sheep, and hay at the time of trial.

   D.      Petitioner's Records, History of Losses, and Tax Returns

           Petitioner did not have a separate bank account for her

   farm.      Petitioner marked an asterisk on stubs of checks she used

   for farm expenses.           She maintained a separate ledger for her

   farm.      Petitioner's farm records were adequate to prepare her

   tax returns.        Petitioner did not keep or analyze her records to

   evaluate how her farm performed.

           Petitioner reported no Federal income tax liability from

   1985 until the time of trial.              Petitioner's tax returns were

   prepared by William Holdner, a certified public accountant

   (C.P.A.).        Petitioner had income, deductions, and net farming

   losses as shown in the chart below:2
                  Deductions Before   Net Loss Before                   Net Loss Including
Year    Income      Depreciation        Depreciation     Depreciation      Depreciation

1985    $20,461       $31,191           $10,730             $7,682          $18,412
1986      8,855        30,640            21,785              8,536           30,321
1987      3,019        29,389            26,370              7,061           33,431



        2
          The amounts for 1985 to 1993 are correct in the
   stipulation but the totals are incorrect. The totals here are
   correct.
                                       - 8 -
1988      3,825        25,426        21,601            5,803        27,404
1989     11,028        42,260        31,232            5,508        36,740
1990      1,622        28,744        27,122            6,138        33,260
1991     39,499        42,042         2,543            8,550        11,093
1992     17,480        37,227        19,747           10,307        30,054
1993      6,985        24,341        17,356            6,107        23,463
        112,774       291,260       178,486           65,692       244,178

   Petitioner lost money on her farm in 36 of the 37 years that she

   operated it.

                                       OPINION

   A.      Requirement That Petitioner Have a Profit Objective

           Section 183(c) disallows certain deductions for activities

   not conducted for profit.         In this context, "profit" means

   economic profit, independent of tax savings.            Herrick v.

   Commissioner, 85 T.C. 237, 255 (1985); Seaman v. Commissioner,

   84 T.C. 564, 588 (1985); Surloff v. Commissioner, 81 T.C. 210,

   233 (1983).         An activity is conducted for profit if the taxpayer

   engages in the activity with an actual and honest profit

   objective.         Surloff v. Commissioner, supra; Dreicer v.

   Commissioner, 78 T.C. 642, 645 (1982), affd. without published

   opinion 702 F.2d 1205 (D.C. Cir. 1983).           The burden of proof is

   on the taxpayer.         Golanty v. Commissioner, 72 T.C. 411, 426

   (1979), affd. without published opinion 647 F.2d 170 (9th Cir.

   1981).         We give greater weight to objective facts than to a

   taxpayer's statement of intent.            Cherin v. Commissioner, 89 T.C.

   986, 992 (1987); Seaman v. Commissioner, supra.

   B.      Whether Petitioner Had a Profit Objective

           Section 1.183-2(b), Income Tax Regs., lists nine factors we

   may consider in deciding whether an activity is engaged in for
                                - 9 -

profit.   These factors are:   (1) The manner in which the taxpayer

conducts the activity; (2) the expertise of the taxpayer or his

advisers; (3) the time and effort expended by the taxpayer in

carrying on the activity; (4) the success of the taxpayer in

carrying on other similar or dissimilar activities; (5) the

taxpayer's history of income or loss with respect to the

activity; (6) the amount of occasional profit, if any, which is

earned; (7) the expectation that the assets used in the activity

may appreciate in value; (8) the financial status of the

taxpayer; and (9) whether elements of personal pleasure or

recreation are involved.   No single factor controls.    Abramson v.

Commissioner, 86 T.C. 360, 371 (1986); Golanty v. Commissioner,

supra.

     1.   Manner in Which the Taxpayer Conducts the Activity

     Conducting an activity similarly to comparable businesses

which are profitable may indicate that a taxpayer engaged in the

activity for profit.    Engdahl v. Commissioner, 72 T.C. 659, 666-

667 (1979); sec. 1.183-2(b)(1), Income Tax Regs.   Maintenance of

complete and accurate records may indicate that the taxpayer has

a profit objective.    Elliott v. Commissioner, 90 T.C. 960, 971-

972 (1988), affd. without published opinion 899 F.2d 18 (9th Cir.

1990).

     Petitioner contends that her activities were businesslike

because she maintained a separate ledger for her farm, made

notations on her checks indicating that they were for business

expenses, and had a C.P.A. prepare her tax returns.     We disagree.
                                - 10 -

     Petitioner did not use her records to evaluate how her farm

performed.   When asked if her farm was profitable based upon its

history of income and expenses, petitioner testified as follows:

     I just don't know that I am really capable of analyzing
     those figures. It's not my field at all. I really
     hate to get into something that is so alien to me as
     accounting, * * * that's why I've always given * * *
     all my things to an accountant to do. I've never made
     out my own income tax returns. I really don't * * *
     feel capable of even analyzing these charts * * *

     Petitioner testified that her position at Foxcroft increased

her ability to sell her horses.    We disagree.    Petitioner sold a

horse 1 month before becoming the headmistress of Foxcroft to an

Oregon buyer and gave two horses away in August 1989, but she did

not introduce any convincing evidence that she tried to sell

horses in Virginia.   Petitioner's agreeing to a 5-year commitment

in Virginia and her failure to show that she tried to sell her

horses while in Virginia detract from her claim that she ran her

farm with a profit objective.

     Petitioner contends that the fact that she reduced the

amount of her livestock in 1985 in response to changing market

conditions and added horticultural products in 1988 shows that

she had a profit objective.   Petitioner introduced no evidence

that these changes produced any income.      It is true that the

discontinuation of an unprofitable operation may suggest that the

activity was conducted in a businesslike manner.      See Seebold v

Commissioner, T.C. Memo. 1988-183.       However, petitioner's

reduction of her livestock in 1985 and her addition of

horticultural products in 1988 are not sufficient changes in her
                                - 11 -

operations to show that she had a profit objective.      Petitioner

has not shown that she ran her farm in a manner similar to

comparable businesses.

     This factor favors respondent.

     2.    The Expertise of the Taxpayer or the Taxpayer's
           Advisers

     Efforts to gain experience and a willingness to follow

expert advice can indicate that a taxpayer has a profit

objective.     See Engdahl v. Commissioner, supra at 668.

Respondent concedes that petitioner has farming expertise.

This factor favors petitioner.

     3.     The Taxpayer's Time and Effort

     The fact that a taxpayer devotes a substantial amount of

time and effort to conduct an activity may indicate that the

taxpayer has a profit objective.     Sec. 1.183-2(b)(3), Income Tax

Regs.     However, the fact that a taxpayer devotes little or no

time to an activity does not necessarily mean that the taxpayer

lacks a profit objective if the taxpayer arranges for qualified

persons to carry on the activity.     Sec. 1.183-2(b)(3), Income Tax

Regs.; see Hughes v. Commissioner, T.C. Memo. 1989-528; Palmer v.

Commissioner, T.C. Memo. 1981-354.

     Petitioner devoted a substantial amount of time to farm

activities while she was in Oregon.      Petitioner estimated that

she spent 1,560 hours in 1988, 1,800 hours in 1989, and 3,600

hours in 1990 working on the farm.       She estimated that she worked

5 hours per day on days that she worked away from the farm, and
                                - 12 -

10 hours per day during weekends, vacations, and other days that

she had no outside work.

     In contrast, petitioner devoted relatively little time and

effort to her farm from July 1, 1988, to May 31, 1989, when she

was in Virginia.     Petitioner contends that her moving to Virginia

does not show that she lacked a profit objective because she

arranged for friends to manage her farm.     She testified that she

contacted "persons responsible for the various farm operations

and livestock in her absence" by telephone at least twice a week

while in Virginia.     Stockfleth visited petitioner's farm twice a

week.     During lambing season, Stockfleth or her daughter visited

petitioner's farm every day.

     We cannot reconcile the small amount of time Stockfleth (or

anyone else) spent at the farm during petitioner's absence with

the substantial amount of time petitioner estimated she spent

working on the farm.     If petitioner spent the time working on

the farm stated above, then it appears that the arrangement

with Stockfleth and petitioner's neighbors was inadequate.

Conversely, if Stockfleth's occasional visits and the

availability of others to help in emergencies were sufficient

to run the farm, petitioner has not adequately explained why

she had to devote as much time to the farm as she did.

     This factor favors petitioner somewhat.

     4.     Taxpayer's Success in Other Activities

        The fact that a taxpayer has previously engaged in similar

activities and converted them from unprofitable to profitable may
                                - 13 -

indicate that he or she has a profit objective, even though the

activity is presently unprofitable.      Sec. 1.183-2(b)(5), Income

Tax Regs.

     Petitioner points out that she has successfully managed

horse shows and trials, worked on farms in Oregon and Montana,

acted as an agent in the sale of cattle, sheep, and horses,

managed a 2,000-head experimental goat herd for the Oregon Health

Sciences Center, raised and sold horses to the American Olympic

Team, and was nominated for the American Olympic Equestrian Team.

     Petitioner has had many impressive accomplishments.

However, she has not shown that she operated businesses

profitably or converted similar activities from unprofitable to

profitable.    Sec. 1.183-2(b)(5), Income Tax Regs.   Petitioner has

not introduced any credible evidence that any of her prior

endeavors were financially successful.

     This factor favors respondent.

     5.    Taxpayer's History of Income or Losses

     A history of substantial losses may indicate that the

taxpayer did not conduct the activity for profit.      Golanty v.

Commissioner, 72 T.C. at 427; sec. 1.183-2(b)(6), Income Tax

Regs.     However, a taxpayer may have a profit objective even if

the activity has a history of losses without any profit.

Bessenyey v. Commissioner, 45 T.C. 261, 274 (1965), affd. 379

F.2d 252 (2d Cir. 1967).

     Petitioner's farm generated substantial losses.     From 1985

to 1993, petitioner's farm lost $178,486 not counting
                              - 14 -

depreciation and $244,178 counting depreciation.    During the

years in issue (1988 to 1990), petitioner lost $79,955 not

counting depreciation and $97,404 counting depreciation.

     Craig Gee (Gee), the revenue agent who audited petitioner's

returns, testified that petitioner said during the audit that she

had a profit in only 1 of the 37 years she ran the farm.     That

profit was for a year in the 1970's.    Gee's testimony was based

on his contemporaneous written notes.   Petitioner said that she

did not recall making this statement.   We see no reason to doubt

Gee's testimony in light of the fact that he based it on

contemporaneous notes and petitioner has no contrary

recollection.

     This factor strongly favors respondent.

     6.   Amount of Occasional Profits, If Any

     Small occasional profits with large continuous losses may

indicate that a taxpayer does not have a profit objective.     Sec.

1.183-2(b)(7), Income Tax Regs.   Petitioner had no profits in any

year from 1985 to 1993, and she apparently had a profit in only 1

of the 37 years she ran the farm.

     Petitioner correctly contends that a profit objective may be

present even if there is no profit, and that she must have only

an actual and honest profit objective, not a reasonable

expectation of profit.   Petitioner cites Siegal v. Commissioner,

T.C. Memo. 1992-334.   In Siegal, the taxpayers bought a

deteriorated citrus grove and an overgrown pasture.    The

taxpayers put the property into good condition.    Although the
                                 - 15 -

taxpayers had losses from 1976 to 1986, we held that they had a

bona fide profit objective during the years in issue, 1982 to

1984.    Id.    Respondent's case is much stronger here than in

Siegal v. Commissioner, supra.      Petitioner's farm had no

profitable years from 1985 to 1993 and had a profit in only 1

year out of the 37 years that she operated it.

     Petitioner contends that she made money from selling three

horses:     (1) Good Mixture in 1972 or 1973 for $18,000; (2)

Rimrock in 1977 for $7,000; and (3) Thatcher in 1991 for

$35,000.3      Petitioner's claim that these sales show that she had

a profit objective is unconvincing.       Those isolated sales, in

view of her losses, do not show that she operated the farm with a

profit objective.

     Petitioner points out that she had unexpected losses during

the years in issue from the theft of livestock, a decline in the

sheep market, and unanticipated equipment repairs.       Unforeseen

losses beyond the control of the taxpayer are considered in

deciding whether the taxpayer conducted the activity for profit.

Sec. 1.183-2(b)(6), Income Tax Regs.       Petitioner has not shown,

however, that without these losses her farm would have been

profitable.

     This factor favors respondent.




     3
         Petitioner also sold Fraulein Oneonta for $1,200 in 1988.
                               - 16 -

     7.    Taxpayer's Expectation of Appreciation in Value

     Whether the taxpayer expects the property used in the

activity to appreciate in value is considered in deciding whether

the taxpayer has a profit objective.    Faulconer v. Commissioner,

748 F.2d 890, 898-899 (4th Cir. 1984), revg. T.C. Memo. 1983-165;

see Lemmen v. Commissioner, 77 T.C. 1326, 1341-1342, 1342-1343

n.22 (1981).    A taxpayer may intend to derive a profit from an

activity, even if the activity is not currently profitable, if

the taxpayer expects income from the activity and appreciation

of the assets used in the activity to exceed the expenses of the

activity.    Sec. 1.183-2(b)(4), Income Tax Regs.

     Petitioner contends that, counting appreciation in the value

of her land, she has shown that she had an actual and honest

profit objective.    We disagree because she has not proven that

the appreciation in the value of her farm plus farm income

exceeded her farm losses or that she expected it to do so.

     Petitioner submitted, at best, inconclusive evidence about

the value of the 100 acres of land she bought in 1961 for

$10,000.

     Petitioner offered a letter from A.J. Caragol, Sr., an

associate broker with the residential real estate department of

Coldwell Banker (Caragol letter).    The Caragol letter stated that

the fair market value of petitioner's farm is $555,000.      The

letter is not dated, it does not state the fair market value of

petitioner's parents' land when she received it, it does not

state how the land was appraised, and it does not distinguish
                               - 17 -

between the value of the land and the improvements to the land.

We did not admit the Caragol letter into evidence because it was

not available at trial, much less 15 days before trial, as

required by the standing pretrial order.4

     It is important for us to know the fair market value of

petitioner's land when she acquired it because without that value

we would be comparing the fair market value of petitioner's 147.6

acres during the years in issue to the $10,000 petitioner paid

for 100 acres in 1961.   Such a comparison inflates the

appreciated value of petitioner's farm.     The value of the land

when petitioner acquired it is the amount for which she could

have sold the land if she did not farm it.     We evaluate how much

the land appreciated while she farmed it.

     Even if we had admitted the Caragol letter into evidence, it

would not have shown how much petitioner's land has appreciated

while she operated the farm.   The record does not show the fair

market value of the 147.6 acres when petitioner acquired it and

there is no evidence about how Caragol made the estimate.

     The Clackamas County Department of Assessment and Taxation

sent several letters to petitioner in 1994 which give the "real

market land value" of petitioner's land on October 14, 1994.     The

letters do not define "real market land value", and we do not

know how it compares to fair market value.


     4
       The Court gave petitioner an opportunity to seek a
stipulation with respondent after trial relating to the admission
of documents such as this letter. The parties did not so
stipulate.
                                 - 18 -

       Petitioner's land is listed by the Clackamas County

Department of Assessment and Taxation as four separate lots.       The

following chart shows the assessed values of the lots in 1974 and

1992:

Lot       Acres         1974 Assessed Value    1992 Assessed Value

1000      44.01            Not in record           $118,390
1090       3.80                $300                     220
1600      60.00              12,600                  11,100
1690      40.00               7,680                   5,710
         147.81              20,580                 135,420

        We cannot meaningfully compare these figures because the

record does not contain the 1974 assessed value for lot 1000.

        Petitioner testified that the assessed value of her farm

increased by $319,490 from 1974 to 1994.      Petitioner's

calculation, however, mixes apples with oranges.      Petitioner

subtracted the assessed value for 1974 from the 1994 "real market

land value".      While the record does not define "real market land

value", we know that it is different than assessed value because

the tax statement issued by the Clackamas County Tax Collector

lists these values separately.

        Even if petitioner's land appreciated by $319,490 from 1974

to 1994, petitioner has not shown that amount exceeded her

losses.     Petitioner's net losses from 1985 to 1993 were $178,486

not counting depreciation and $244,178 counting depreciation.

The record does not show the amount of petitioner's losses before

1985.     We do not speculate as to the amounts of petitioner's

losses before 1985, but we note that petitioner had losses in 36
                                   - 19 -

out of 37 years.     Petitioner has not shown that she in fact ever

considered whether land appreciation would more than offset her

losses, much less that it did so.

     This factor favors respondent.

     8.     Financial Status of Taxpayer

     Substantial income from sources other than the activity,

especially if the losses generate substantial tax benefits, may

indicate that the taxpayer is not conducting the activity for

profit.     Sec. 1.183-2(b)(8), Income Tax Regs.

     Petitioner contends that, because she is not wealthy, her

purpose in having a farm was not to offset substantial income

from other sources.     We disagree.    While petitioner is not

wealthy, her farm losses enabled her to avoid paying Federal

income taxes from 1985 to 1993.       Petitioner's farm losses

compared to her other income5 are as follows:

     Year            Schedule F Losses           Nonfarm Income

     1985                $18,412                    $26,813
     1986                 30,321                     34,404
     1987                 33,431                     28,578
     1988                 27,404                     43,652
     1989                 36,740                     28,917
     1990                 33,260                     24,368
     1991                 11,093                     17,034
     1992                 30,054                     39,791
     1993                 23,463                     14,795
                         244,178                    258,352



     5
       This includes gross income from Foxcroft, Oregon State
Board of Higher Education, interest and dividend income, and
income from pensions from the State of Oregon Public Employees
Retirement System and Portland Community College.
                               - 20 -

     For the 9 years for which we have petitioner's tax returns,

petitioner's nonfarm income exceeds her farm losses by only

$14,174.    Petitioner's farm losses have generated substantial tax

benefits.

     This factor favors respondent.

     9.    Elements of Personal Pleasure

     The presence of recreational or personal motives in

conducting an activity may indicate that the taxpayer is not

conducting the activity for profit.     Sec. 1.183-2(b)(9), Income

Tax Regs.; see Faulconer v. Commissioner, 748 F.2d at 901;

Jackson v. Commissioner, 59 T.C. 312, 317 (1972) (suffering is

not a prerequisite to deductibility).      However, for losses from

an activity to be deductible, the taxpayer's objective in

conducting the activity must be to realize a profit.      Bessenyey

v. Commissioner, 45 T.C. at 274.

     Petitioner testified that she did not farm for fun, but we

think the objective facts show otherwise.     She suggested no

reason other than enjoyment to explain why she conducted an

activity which lost money for 36 out of 37 years.

     This factor favors respondent.

C.   Conclusion

     While no one factor controls, Abramson v. Commissioner, 86

T.C. at 371, we find it significant that petitioner's farm had a

long history of losses, that petitioner derived substantial tax

benefits from these losses, and that petitioner left her farm in
                              - 21 -

Oregon to work in Virginia.   We hold that petitioner did not

operate her farm for profit in 1988, 1989 and 1990.

     To reflect the foregoing and concessions,


                                       Decision will be entered

                                  under Rule 155.
