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boarded at any given time. Bendabout also lost one of its best
clients, whose polo career ended when he was shot.
Another part of petitioner's business plan for Bendabout was
to develop the wooded areas of the farm for a wildlife habitat in
order to generate revenue from hunting, fishing, and recreational
use. Dove hunting, deer hunting, and quail hunting were all
available at Bendabout during the years in issue. Food patches
for quail were planted throughout the woods. Several open fields
were planted with species that benefit both dove and quail.
Bendabout had approximately 4 acres of water, including Woods
Lake, Boone Lake, Barn Lake, and Silo Pond which were available
for fishing during the years in issue.
Discussion
Respondent determined that the Johnstons did not engage in
their farm activity with the intent to earn a profit, and
therefore pursuant to section 183 disallowed the related
Schedule F losses for the years in issue. Petitioners assert
that they entered into and carried on Bendabout with the intent
to earn a profit, and therefore their losses are allowable.
Section 183(a) provides that if an activity is not engaged
in for profit, "no deduction attributable to such activity shall
be allowed", except as otherwise provided in section 183(b).7
7 Sec. 183(b)(1) provides that deductions which would be
allowable without regard to whether such activity is engaged in
for profit shall be allowed, such as interest and State and local
taxes. Sec. 183(b)(2) provides that deductions which would be
(continued...)
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