Hobby Ecotourism Operation’s Losses Can’t Support Tax Deductions

A Texas couple’s losses from a farming and ecotourism operation can’t support deductions to offset their taxable income because the operation wasn’t intended to make a profit, the US Tax Court said Monday.

The IRS asserted $1.85 million in deficiencies and about $370,300 in penalties against Gary and Marlee Schwarz for their taxable years 2015-2017 after determining that their partnership hadn’t engaged in a for-profit activity.

The Schwarzes petitioned the Tax Court, arguing Tecomate Industries LLC’s flowthrough Schedule F losses could support their deductions. TI leased Zapata County land and offered packages to fish or hunt deer, birds, and other ...