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Pursuant to the CBR lease, Omega was to furnish any
machinery, equipment, water, fertilizer, chemicals, and labor to
plant, grow, and harvest any and all crops. Omega was also
responsible for all costs and expenses associated with the
raising of livestock, including, but not limited to, fencing
construction and maintenance, barn maintenance, road maintenance,
and feed costs. The maximum number of livestock allowed to graze
on the property was 200. Normal repairs were to be absorbed by
Omega, but CBR was responsible for major repairs costing more
than $2,000. Omega and CBR entered into a new leasing agreement
on May 1, 1995. Only petitioner signed the new agreement between
CBR and Omega as an officer of both CBR and Omega. The new
agreement was similar to the previous lease with CBR; however,
Omega would now pay CBR $3,000 per month for the rental of land
and $1,400 per month for the rental of certain mobile homes. On
its income tax returns for 1990 through 1995, Omega reported
receipts and net losses from farming activity as follows:
Year Receipts Net Loss
1990 -0- $39,698
1991 $2,692 163,687
1992 5,620 191,516
1993 12,938 148,268
1994 4,385 155,156
1995 185 135,239
Total 25,820 833,564
From 1990 through 1995, Omega’s receipts from its farm
activity consisted of the following components:
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Last modified: May 25, 2011