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formed a proprietorship (the nursery) to rent the land from FCC
and grow ligustrum trees for resale.
Petitioners expected the trees to mature and be ready for
resale in approximately 3 years. Instead, the trees were
afflicted with continuous problems including freezes, disease,
and inadequate care. Petitioner testified that he was not
properly equipped to care for his nursery and, as a result, has
not been able to prepare the trees for resale. Despite the
substantial time petitioners devoted to the nursery, at the time
of trial they had not sold one tree.
On their 1986 joint Federal income tax return, petitioners
depreciated a truck, a farm tractor, a trailer and cart, security
equipment, and two cars. The remainder of expenses attributable
to the nursery was currently deducted on petitioners' Schedule F.
These expenses included chemicals, rent paid for the FCC's land,
seeds and plants, supplies, taxes, utilities, gasoline, repairs
and maintenance, insurance, fertilizers, and labor. Petitioners
continued to deduct similar expenses on their 1987 through 1990
returns. Petitioners have not received the approval of the
Internal Revenue Service (IRS) to amend their treatment of the
expenses deducted.
Farmers, like taxpayers in any other type of business, may
deduct their ordinary and necessary business expenses under
section 162. The farming business includes the operation of a
nursery and the raising of ornamental trees such as petitioners'
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