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apples, petitioner grows the apples, picks and bags them, and
then takes the bags to his offices for sale to his patients.
Thus, petitioner considers his apple orchard an integral part of
his dental practice.
Petitioner testified that he has tried, but prefers not, to
sell the apples commercially. Some of the apples have suffered
injury from insects and are otherwise marked which makes much of
his fruit less valuable on the commercial market; thus, in
petitioner's opinion the profit margin from commercial sales is
not good. Instead, he prefers to grow the best, most nutritious
apples that he can and provide them to his patients. If a
patient cannot afford to purchase the apples, petitioner gives
them to the patient without charge. Petitioner estimates that of
all his patients, only 10 or 15 percent avail themselves of the
apples. There is no question that petitioners have never made a
profit with respect to the apple orchard activity during their
14-year involvement with the fruit.
Petitioners' Tax Returns
Petitioners formed a partnership, Twin Creeks Organic Farm,
in 1992. Petitioners are the only partners in the partnership.
For reporting purposes, petitioners combined their dentistry
activity gross receipts with their apple orchard activity income
and expenses on one Form 1065 (U.S. Partnership Return of
Income). In each of the years at issue, petitioners reported the
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Last modified: May 25, 2011