S.K. Johnston, III and Julie N. Boyle f.k.a. Julie N. Johnston, et al. - Page 12

                                               - 12 -                                                 

            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...)               



Page:  Previous  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  Next

Last modified: May 25, 2011