16 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 ActivitiesPage: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Next
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