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Separate or Single Activity
Section 1.183-1(d), Income Tax Regs., provides, where the
taxpayer is engaged in several undertakings, each of these may be
a separate activity, or several activities may constitute one
activity. In ascertaining whether two or more activities of the
taxpayer may be treated as one activity, we consider all of the
facts and circumstances, including the degree of organizational
and economic interrelationship, the business purpose served by
the undertakings together or separately, and the similarity of
the undertakings. Id.; see also Schlafer v. Commissioner, T.C.
Memo. 1990-66. The Commissioner will generally accept the
characterization by the taxpayer of several undertakings either
as a single activity or as separate activities. Sec. 1.183-1(d),
Income Tax Regs. The taxpayer's characterization will not be
accepted, however, when it appears that his or her
characterization is artificial and cannot be reasonably supported
under the facts and circumstances of the case. Id. If two
undertakings are treated as separate activities, deductions and
income from each separate activity are not aggregated either in
determining whether a particular activity is engaged in for
profit or in applying section 183. Id.
Respondent determined that petitioners' apple orchard
activity is separate and distinct from the dentistry activity.
Petitioner asserts that the two undertakings are related in that
he cannot practice holistic dentistry without his apple orchard.
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Last modified: May 25, 2011