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Petitioners never raised any cattle or sheep on the timber
farm, and, in approximately 1989, petitioners abandoned plans to
raise cattle and sheep on the timber farm due to lack of adequate
summer rainfall to sustain a second harvest of hay that the
cattle and sheep would need.
There were no recreational amenities or activities of any
kind on the timber farm -- no tennis court, no putting green, no
swimming pool, no horses, no lake, no boating, no fishing, no
recreational or resort facilities. The evidence is clear that
petitioners' timber farm was not owned, operated, or used by
petitioners for recreation, leisure, or other personal purpose.
Petitioner personally set up and maintained computerized
accounting records with respect to expenses relating to the
timber farm. As mentioned earlier, petitioners' records were not
totally adequate, and expenses relating to the timber farm were
often mislabeled or associated with the wrong activity. The
evidence establishes, however, and respondent does not dispute,
that all of the expenses claimed on petitioners' original Federal
income tax returns and all of the expenses claimed on
petitioners' proposed revised Federal income tax returns with
respect to the timber farm were incurred and are fully
substantiated -- as to amount and payment -- by petitioners'
books and records.
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