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In examining the arrangement with respect to the production
of agricultural products on petitioner's property, therefore, we
look not only to the obligations imposed upon petitioner by the
leases, but to those obligations that existed within the overall
scheme of the farming operations which were to take place on
petitioner's property. These include petitioner's obligations as
a partner in Mizell Farm pursuant to the partnership agreement,
as well as the general understanding between petitioner and his
sons with respect to the production of agricultural products on
his property. Viewed in this manner, the arrangement provided,
or contemplated, that petitioner was to materially participate in
the production of agricultural products on the property.
Based upon the record as a whole, we find that petitioner
and his sons understood and contemplated that petitioner was to
"engage to a material degree in the physical work related to the
production of * * * [agricultural] commodities" on his property.
Sec. 1.1402(a)-4(b)(3)(ii), Income Tax Regs. The partnership
agreement required him to do so, as he concedes, and the leases
in turn contemplated that he, as a member of the partnership,
would materially participate in such production. We further
find, taking into consideration the leases, the partnership
agreement and the general understanding between the petitioner
4(...continued)
including any fixed amount to which the purchaser has a right as
a result of contractual arrangements existing at the time of
sale."
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Last modified: May 25, 2011