Tolbert S. Wilkinson and Suzanne T. Wilkinson - Page 16

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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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