Nickerson v. Commissioner

Melvin Nickerson (plaintiff) worked as a self-employed advertising professional and was looking for a new career. Having worked evenings and weekends on his father’s farm as a teenager, Nickerson decided that starting a dairy-farm business would be a profitable new career. After several years of searching for a property, Nickerson acquired an abandoned dairy farm that had been out of business for eight years. Nickerson visited the farm on weekends during growing season and twice per month for the rest of the year. Farming the land in its current condition was impossible, and Nickerson did not acquire any livestock or equipment. Whenever Nickerson visited the property, he worked on gradually renovating the farmhouse, hay barn, and equipment shed. Nickerson expected that generating a profit from the farm would take 10 years. Nickerson leased the property to a farmer, who, in addition to paying rent, aided Nickerson by cultivating the land to prepare it for farming. Nickerson deducted the farm-restoration costs as business expenses on his federal tax return. The federal tax commissioner (commissioner) (defendant) determined that Nickerson’s expenses were not tax deductible, finding that profit was not Nickerson’s primary motivation in operating the farm. Nickerson petitioned the United States Tax Court for a redetermination. The tax court ruled in favor of the commissioner, and Nickerson appealed to the United States Court of Appeals for the Seventh Circuit.