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these activities, we accept petitioners' characterization.
Neither party addressed, either at trial or on brief,
whether the holding of the land for its appreciation in
value should be treated as a separate activity for section
183 purposes. On this point, the regulations provide in
pertinent part as follows:
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).
[Sec. 1.183-1(d)(1), Income Tax Regs.]
The above-quoted provision of section 1.183-1(d)(1), Income
Tax Regs., applies only where "land is purchased or held
primarily with the intent to profit from increase in its
value". See Engdahl v. Commissioner, 72 T.C. 659, 668 n.4
(1979); Hoyle v. Commissioner, T.C. Memo. 1994-592; sec.
1.183-1(d)(1), Income Tax Regs. Because it does not appear
that petitioners' primary intent was to profit from
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