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The Tax Court in Iverson, TC Memo 2012-19, has disallowed losses incurred in a cattle ranch owned by Mr. Iverson. The taxpayer was the founder and an executive with a company based in Minnesota and appeared to use the ranch to entertain clients of his Minnesota company. So, the decision is not surprising in that regard. The decision could nonetheless spell trouble for other ranch owners. The court seemed to focus on the fact that the taxpayer did not live at the ranch, did not keep detailed records on participation in ranch activities, and had a full-time paid ranch manager who ran the day to day activities of the ranch. Many owners of ranches in Texas do not live and work full-time at their ranch and have paid employees who handle the day to day activities. Where the taxpayers do not keep extensive files, to-do lists, home and mobile phone records, business plans, project descriptions and instructions to employees documenting and establishing their active involvement in the regular, continuous, and substantial management and day-to-day activities of ranch, they may have difficultly persuading the fact finder that they have the necessary involvement in the ranch activities to avoid passive activity classification. This would particularly be true of taxpayers who do not live at the ranch or actually “work” the ranch when they are at the ranch.