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return; (7) petitioners earned substantial amounts of income from
sources other than their farming activity for the years in issue;
and (8) petitioners incurred significant losses from their
farming activity during the years in issue which they used to
offset their other income.
From the foregoing facts, we do not consider it unreasonable
for respondent to have concluded that petitioners' activities in
connection with the property did not constitute a trade or
business during the years in issue. Accordingly, we find that
respondent’s position had a reasonable basis in fact.
Petitioners also contend that respondent's position was not
substantially justified in law because it is inconsistent with
positions taken by the Commissioner in two private letter rulings
and Ray v. Commissioner, T.C. Memo. 1996-436.
The rulings consider whether CRP payments were includable in
the taxpayers' net earnings from self-employment and therefore
subject to the self-employment tax imposed by section 1401. The
Commissioner's conclusions regarding the nature of the CRP
payments, as articulated in the rulings, were dependent upon
factual determinations focusing on whether the taxpayers
materially participated in the trade or business of farming
during the relevant years. The private letter rulings do not
stand for the proposition that a taxpayer is actively engaged in
the trade or business of farming merely because the taxpayer is
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