- 19 - the holding of the land (that is, deductions other than those directly attributable to the holding of the land such as interest on a mortgage secured by the land, annual property taxes attributable to the land and improvements, and depreciation of the improvements to the land). [Id.] Applying the foregoing regulation in this case, we conclude that the “income derived from farming” includes all income reported by petitioners on their Schedules F except the amount listed on the “Other income” line, which the testimony of both Dr. and Mrs. Burrus confirms is income petitioners received from renting three houses located on the Maple Row land. Such income is more appropriately allocable to the holding of land. As for deductions “directly attributable to the holding of the land” that should be excluded from farming deductions, we conclude, based in part on the parties’ agreement,8 that the amounts reported on the Schedules F for mortgage interest, taxes, and 8 Petitioners offered into evidence a table indicating, and further argued on brief, that the Schedule F, Profit or Loss From Farming, entries reported for mortgage interest, taxes, depreciation, and conservation expenses are properly allocable to the holding of land, while respondent concedes on brief that all of the foregoing items except conservation expenses are so allocable. Given respondent’s concession regarding depreciation, we do not consider whether the record supports any allocation of some portion of the depreciation (e.g., for equipment) to the farming activity. Respondent further concedes on brief that the expenses treated as directly attributable to the holding of the land for purposes of sec. 1.183-1(d)(1), Income Tax Regs., are deductible by petitioners, subject, in the case of the mortgage interest, to the restrictions of sec. 163(d).Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Next
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