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the years 1991, 1992, and 1993, petitioners were school teachers,
and they filed joint Federal income tax returns. Petitioners,
during 1991 and 1992, used a residence in Snow Hill that was
situated on a 36-acre farm which they acquired during 1972.
Petitioners’ plan was to convert the farm from annual crops to
trees. During the years in question, 18 acres of the farm were
leased to a farmer for an annual rent of $820. Seven acres had
been cultivated with pine trees, and four additional acres were
cleared for the future planting of trees. The remainder of the
land was not specifically accounted for at trial but was where
the residence was located.
Nathaniel L. Ward, Sr. (petitioner), was a science teacher,
and he taught about 150 miles from the Snow Hill residence. He
maintained an apartment in the community where he taught. During
the years in question, petitioner made about three weekly round
trips from the location where he taught to the Snow Hill
residence, where his family generally resided. Petitioner
occasionally did some work at the farm tending to the trees and
performing general maintenance to the farm property.
Petitioners, on their Schedule F, reported income of $820
from rent each year and claimed expenses which would have
resulted in losses from farming of $30,340, $52,400, and $48,273
for 1991, 1992, and 1993, respectively, after considering the
$820 from rent. Respondent disallowed the claimed losses for
lack of substantiation for all 3 years and for lack of a profit
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