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1 In 1992, petitioners improperly reported $500 of gross income
from the farm on Schedule F; this amount represents the
unrealized increase in value of their horse. The amount of
revenue from the sale of apples, or any other farm related
activity, was $0.
2 Although petitioners reported sales of farm products of $1,700
and $850 on Schedule F in 1993 and 1994, respectively, an unknown
portion of the amount reported in 1993 and $700 of the amount
reported in 1994 was for the estimated value of apples they
consumed.
3 These amounts are taken from part ll of petitioners' Schedule
F.
4 These amounts are the totals of the farm expenses reported on
line 35 of petitioners' Schedules F. The reported expenses
include a deduction for "Other expenses", which was reported
separately on line 34a of the schedules filed for 1993 and 1994.
The amount of the Other expenses was $18,590 in 1993 and $22,455
in 1994.
5 This "Other expense" was reported on line 20 of petitioners'
Form 1065. The expenses were itemized on a self-made schedule
titled "Twin Creeks Organic Farm", which was attached to the
partnership return.
OPINION
Issue 1. The Apple Orchard Activity
The first issue for decision is twofold: (1) Whether
petitioners' apple orchard activity and dentistry activity should
be treated as one activity or two separate activities for
purposes of section 183; and (2) whether petitioners' apple
orchard activity was engaged in with the intent to make a profit
within the meaning of section 183(a). Respondent determined that
petitioners' apple orchard activity is a separate and distinct
undertaking from the dentistry activity, and furthermore
petitioners engaged in the apple orchard activity with no bona
fide objective of profit. We agree.
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