John P. & Teresa Hennen - Page 9

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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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