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required by the Internal Revenue Code and has cooperated with all
reasonable requests by the Secretary for information, documents,
meetings, etc.; and (3) introduces, in a court proceeding,
credible evidence with respect to any factual issue relevant to
ascertaining the liability of the taxpayer for any tax imposed
under subtitle A or B. Sec. 7491(a)(1) and (2).1 Respondent
contends that petitioners do not meet the requirements of section
7491(a). Petitioners do not contend otherwise. We treat this as
petitioners’ concession that they bear the burden of proof on the
farm loss and rental property issues.2
B. Whether Petitioner Operated His Farm for Profit
The first issue for decision is whether petitioner operated
the farm for profit in 1995, 1996, and 1997. A taxpayer conducts
an activity for profit if he or she does so with an actual and
honest profit objective. Surloff v. Commissioner, 81 T.C. 210,
233 (1983); Dreicer v. Commissioner, 78 T.C. 642, 645 (1982),
affd. without opinion 702 F.2d 1205 (D.C. Cir. 1983). In
deciding whether petitioner operated the farm for profit, we
consider the following nine nonexclusive factors: (1) The manner
1 Sec. 7491 applies to court proceedings arising in
connection with examinations beginning after July 22, 1998. See
Internal Revenue Service Restructuring & Reform Act of 1998, Pub.
L. 105-206, sec. 3001(a), 112 Stat. 685, 726. The examination in
this case began after July 22, 1998.
2 We discuss the burden of production and burden of proof
for the penalties below at par. E.
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