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had sufficiently increased in weight, they would be sold at
auction. Petitioners also asserted that their livestock would
increase in size and value through breeding. The record does not
support petitioners' assertions.
Section 1.183-1(d)(1), Income Tax Regs., provides that
Where land is purchased or held primarily with the
intent to profit from increase in its value, and the
taxpayer also engages in farming on such land, the
farming and the holding of the land will ordinarily be
considered a single activity only if the farming
activity reduces the net cost of carrying the land for
its appreciation in value. Thus, the farming and
holding of the land will be considered a single
activity only if the income derived from farming
exceeds the deductions attributable to the farming
activity which are not directly attributable to the
holding of the land (that is, deductions other than
those directly attributable to the holding of the land
such as interest on a mortgage secured by the land,
annual property taxes attributable to the land and
improvements, and depreciation of improvements to the
land).
In that regard, petitioners' gross income derived from their
farming activity for the taxable years 1991, 1992, and 1993, was
$715, $1,919, and zero, respectively.6 Petitioners' car and
truck expenses for the taxable years, 1991, 1992, and 1993, were
$2,601, $7,124, and $3,724, respectively. The nominal income
from the farming activity fell far short of the deductions
attributable to the farming activity (e.g., the car and truck
expenses). Sec. 1.183-1(d)(1), Income Tax Regs. Accordingly,
6 Petitioners entered a loss of $600 for gross income
derived from their farming activity for the 1993 taxable year.
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