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extended period of time (26 years), and (3) there was no realistic
expectation that petitioners’ Schedule F activities would be
profitable.
On the other hand, petitioners maintain that they entered into
their Schedule F activities with the intent of making a profit.
Petitioners dispute respondent’s assertion that they failed to
execute their Schedule F activities in a businesslike manner.
Further, they assert that despite decades of losses from their
Schedule F activities, these losses represent startup period losses
and were attributable to unforeseen circumstances (i.e., drought
and fluctuating cattle prices). For the reasons set forth below,
we agree with respondent.
We begin our analysis with the applicable statutory
provisions. Generally, under section 183(a), individuals are
disallowed deductions attributable to an activity “not engaged in
for profit” except to the extent of any gross income generated by
such activity. Section 183(c) defines an activity not engaged in
for profit as “any activity other than one with respect to which
deductions are allowable for the taxable year under section 162 or
under paragraph (1) or (2) of section 212”. Accordingly, section
183 is considered in pari materia with sections 162 and 212. See
sec. 1.183-2(a), Income Tax Regs.
The standard for determining whether an expense is deductible
under sections 162 and 212 (and thus section 183) is identical: a
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