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Petitioners contend that their land is well located for
future development. They contend that, at the time of trial, the
farm was worth more than $750,000. Petitioner testified that
sometime in the future he probably would sell some of the farm
land for commercial development to realize the appreciation that
has occurred in the 20 years petitioners have owned it. His
testimony did not convince us that, either when he started the
tree farm or during the years in issue, he considered or expected
that future appreciation of the farm land would offset the
cumulative losses from the farm.
The record is silent as to the fair market value of
petitioners' land when they started the tree farm. Thus, we can
only compare the fair market value of petitioners' 85 acres in
2000 to the $78,300 petitioners paid for it sometime before 1979.
Such a comparison improperly includes appreciation in the value
of petitioners' farm that occurred before petitioners began their
tree farm activity in 1990. See Pearson v. Commissioner, T.C.
Memo. 1996-66.
Petitioners contend that their trees will increase in value.
However, petitioners did not show how much the value of their
trees will appreciate or when tree appreciation plus other tree
income will exceed their accumulated losses.
This factor favors respondent.
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