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constitute expenditures with respect to a facility. Sec. 1.274-
2(e)(3), Income Tax Regs.
Applying these principles to the facts here, the ranch for
which the expenditures were made clearly appears to be a
"facility". It is an item of real property rented (or used) by
petitioner. Sec. 1.274-2(e)(2), Income Tax Regs. It was used by
petitioner for hunting. Hunting generally constitutes
recreation. See id. The expenditure (rent) made by petitioner
each year to obtain the use of the ranch is an operating expense
and, therefore, constitutes an item with respect to the facility.
Sec. 1.274-2(e)(3), Income Tax Regs. Accordingly, section
274(a)(1)(B) disallows the deduction taken each year for the rent
paid with respect to the hunting lease.
Petitioner, however, argues that the ranch does not
constitute a "facility" because the hunting lease did not grant
petitioner the "exclusive use" of the ranch, citing our opinion
in Harrigan Lumber Co. v. Commissioner, 88 T.C. 1562 (1987),
affd. without published opinion 851 F.2d 362 (11th Cir. 1988).
In Harrigan the taxpayer leased property for hunting. The lease
provided that the taxpayer's "officers, employees, and guests
* * * shall enjoy exclusive hunting rights," except that certain
members of the lessor's family were also entitled to hunt on the
ranch. Id. at 1563. The taxpayer argued that "hunting rights
* * * are intangible property rights and * * * do not constitute
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