Harold W. and Julia A. Kahla - Page 11




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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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