George R. and Barbara H. Burrus - Page 15

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          in several undertakings, each of which constitutes a separate               
          activity for purposes of section 183, or several undertakings may           
          constitute a single activity for this purpose.  Id.  The                    
          regulations further state:                                                  
                    (d) Activity defined.  (1) Ascertainment of                       
               activity.  * * *  In ascertaining the activity or                      
               activities of the taxpayer, all the facts and                          
               circumstances of the case must be taken into account.                  
               Generally, the most significant facts and circumstances                
               in making this determination are the degree of                         
               organizational and economic interrelationship of                       
               various undertakings, the business purpose which is (or                
               might be) served by carrying on the various                            
               undertakings separately or together in a trade or                      
               business or in an investment setting, and the                          
               similarity of various undertakings.  Generally, the                    
               Commissioner will accept the characterization by the                   
               taxpayer of several undertakings either as a single                    
               activity or as separate activities.  * * *  Where land                 
               is purchased or held primarily with the intent to                      
               profit from increase in its value, and the taxpayer                    
               also engages in farming on such land, the farming and                  
               the holding of the land will ordinarily be considered a                
               single activity only if the farming activity reduces                   
               the net cost of carrying the land for its appreciation                 
               in value.  * * *  [Sec. 1.183-1(d)(1), Income Tax                      
               Regs.; emphasis added.]                                                
          The regulations thus provide for delineating activities under               
          section 183 with a general rule drawing on all facts and                    
          circumstances, and a special rule in the case of land acquired or           
          held primarily for its appreciation on which farming is also                
          conducted.  In the latter circumstance, the regulations provide             
          that the holding of the land and the farming will be considered a           
          single activity only if the farming activity reduces the net cost           





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