Terry F. and Carol J. Zdun - Page 8

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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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