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1992, petitioner, through LFI, claimed that Granot Loma was used
exclusively for business, and continued to depreciate Granot Loma
buildings and improvements, to deduct all of Granot Loma’s
alleged operating expenses, and to report as lodging income
amounts paid or credited to LFI by petitioner’s other companies.
On his Federal income tax returns for 1988 through 1992,
petitioner deducted passthrough losses from LFI in the aggregate
amount of $3,376,634.
In support of LFI’s aggressive writeoff of Granot Loma,
petitioner asserts that LFI maintained extensive books and
records, experimented with and abandoned unprofitable activities,
and consulted with various experts regarding the renovation of
Granot Loma as a commercial facility. Petitioner also contends
that he devoted considerable time and effort to the renovation
and operation of Granot Loma, that he regularly used Granot Loma
for business meetings throughout the years at issue, and that he
intended, among other things, to sell Granot Loma at a profit.
We first examine the activities in which LFI allegedly
engaged in order to ascertain whether any of those activities
were conducted with sufficient continuity and regularity to
satisfy the threshold test for a trade or business. Petitioner
contends that Granot Loma was the site of an operating Christmas
tree farm, a timbering operation, a maple syrup operation, and a
rental activity. In connection with the lodge, LFI also sold at
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