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the exclusive use test, using the structure to process or market
the product is "nonpermissible". See Oregon Trail Mushroom Co.
v. Commissioner, T.C. Memo. 1992-293; sec. 1.48-10(e)(1)(i)(A),
Income Tax Regs. Section 1.48-10(e)(1)(iv), Income Tax Regs,
provides that "a horticultural structure that contains an area
for processing plants or plant products will fail the exclusive
use test because there is a nonpermissible use."
To decide whether the Tobacco Barn meets the exclusive use
test, we must therefore consider whether the curing, stripping,
grading, baling and boxing of the tobacco leaves constitute
"production" activities or whether any is a "nonpermissible" use
of that structure.
In Oregon Trail Mushroom Co. v. Commissioner, T.C. Memo.
supra, the issue was whether certain structures were used for the
commercial production of mushrooms. In that case, we held that a
structure used in the "production" of mushrooms is not merely a
structure where mushrooms actually grow. Rather, we held that a
structure used to pasteurize compost, i.e., "to kill all
organisms so that only mushrooms will grow", constituted a
structure used in the production of mushrooms. We held that the
pasteurization step was a necessary step and to eliminate that
step would reduce or destroy the mushroom crop. See id.
Although in Oregon Trail Mushroom Co. v. Commissioner, supra, we
gave broad interpretation to the term "production facility", we
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