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those directly attributable to the holding of the land
such as interest on a mortgage secured by the land,
annual property taxes attributable to the land and
improvements, and depreciation of improvements to the
land).
It is clear from petitioners' Schedules F that the costs
attributed to the orchard activity (apart from those directly
attributable to the holding of the land) substantially exceed the
income from the apple sales. Thus, petitioners do not satisfy
the test set forth in section 1.183-1(d), Income Tax Regs., for
combining their farming activity with their holding of the land
into a single profit-motivated activity. We find that this
factor weighs against petitioners.
Fifth, the fact that the taxpayer has engaged in similar
activities in the past and converted them from unprofitable to
profitable enterprises may indicate that he is engaged in an
activity for profit even though the activity is presently
unprofitable. Sec. 1.183-2(b)(5), Income Tax Regs. Petitioners
have never before engaged in commercial farming of any type. We
find that this factor weighs against petitioners.
The taxpayer's history of income, losses, and occasional
profits with respect to an activity can be indicative of a profit
objective. Sec. 1.183-2(b)(6) and (7), Income Tax Regs. The
presence of losses in the formative years of a business is not
inconsistent with an intention to achieve a later profitable
level of operation, bearing in mind, however, that the goal must
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