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Although petitioners contend that the purported oral lease
agreement did not require Mrs. Hennen to participate materially
in the farming operations, the record supports a finding that
Mrs. Hennen played a material role in the production of
agricultural commodities under an arrangement with her husband.
For 38 years through the taxable years at issue, Mrs. Hennen
performed general farming services on the farm on a regular and
intermittent basis, as we detailed in the findings of fact.
Petitioners admitted that Mrs. Hennen purchased cattle, loaded
cattle, vaccinated cattle, cleaned shop, picked up parts, and
unloaded grain. In addition, they acknowledged that Mrs. Hennen
drove a tractor and performed the farm bookkeeping. As noted,
Mrs. Hennen worked on the farm approximately 1,000 hours per
year. We deem it immaterial that Mrs. Hennen also purportedly
was paid a salary for her services with a corresponding deduction
taken on their tax returns. In our view, these "regularly
performed services are material to the production of an
agricultural commodity, and the intermittent services performed
are material to the production operations to which they relate."
Sec. 1.1402(a)-4(b)(6) Example (1), Income Tax Regs.
The regulations provide in pertinent part, that if the
rental income is derived under an arrangement between the owner
of land and another person which provides that such other person
shall produce agricultural commodities on such land, and that
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