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operate the farm with an intent to make a profit. Accordingly,
we sustain respondent's determinations with regard to the farm
expenses remaining in issue.
Petitioner's residence is in the front house of three units
on his property. There are two smaller units in the backyard
which he rents. Petitioner testified that his house is about 950
square feet and that the rental units are 650 and 350 square
feet. Petitioner resides in his house for about 4 days of the
week. He allocated the expenses which he claims are related to
all three houses, one-third to his personal residence and two-
thirds to the rental units. Respondent did not question the
proposition that all the expenses related to all three units.
On his Schedule E, petitioner reported $7,866 of gross rents
and deducted $16,910 of expenses, which resulted in a loss of
$9,044. The $16,910 of claimed deductions on the Schedule E were
expenses pertaining to petitioner’s personal residence and
expenses pertaining to the rental units. Respondent allowed the
deduction of the full amount of taxes and interest deducted, $757
and $11,699, respectively. The remaining expenses which
petitioner deducted were $1,449 for insurance, $1,204 for
utilities, $1,362 for depreciation, $369 for gardening, and $70
for miscellaneous. These total $4,454, and respondent disallowed
$3,712 of that amount.
Respondent’s position is that petitioner's apportionment is
not reasonable. Upon our own consideration of the record, we
find that petitioner is entitled to deduct 40 percent of the
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