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a farming activity should be considered only if the income from
the farming activity exceeds the carrying cost of the land. The
carrying cost of the land includes the mortgage interest and
taxes. LaMusga v. Commissioner, T.C. Memo. 1982-742.
After purchasing the ranch, petitioner says he caused fences
to be erected and roads and buildings to be built, and made
various other improvements. Neither the fact nor the amount of
such improvements was established. Petitioners intended to one
day retire, live on the ranch, and open a small medical practice.
Petitioner stated that the ranch would give him something to do.
We doubt that petitioners in fact expected that any appreciation
would ever produce an overall profit; no credible evidence to
that effect was presented here. Each year from 1987 through
1992, the ranch produced losses of over $100,000. We infer that
the losses incurred each year simply outpaced any appreciation.
Furthermore, the mortgage interest deductions claimed from 1986
through 1992 totaled $138,920, and the taxes paid for that period
totaled $8,584; the gross income from the ranching activity
totaled only $52,345. Because the income from the ranch does not
exceed the carrying cost of the land, any potential appreciation
of the ranch cannot be considered. At all events, petitioners
did not prove that any of the ranch assets could be expected to
appreciate to any significant extent. This factor favors
respondent.
5. Petitioner's Success in Other Activities
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