-7- Respondent audited petitioners’ return for 1995. In that audit, respondent did not disallow the deductions petitioners claimed in connection with their farming activity for that year. Several natural events occurred during the years at issue that impacted the lemon farming activity. A 1993 wildfire destroyed some of the lemon trees. Poor soil conditions led petitioners to consult a supervising plant pathologist in 1997 out of concern for their trees’ health. The pathologist examined the trees and noted that they looked unhealthy and had curled yellow leaves. The pathologist reported that these problems could be due to the soil staying wet too long or to a mineral deficiency. Petitioners also claim they experienced a water shortage during the years at issue. Petitioners drilled additional wells in 2000 and 2002, but their efforts did not produce any additional water. Mr. Bangs indicated at trial that he would await the outcome of this case before he decided whether to drill more wells on the property. The Trust Scheme Petitioners became involved in a trust scheme in 1999. They did not consult an attorney or CPA before they bought into the scheme. Petitioners transferred title to most of their assets to trusts to avoid paying taxes on the income from these assets. Petitioners, in contrast to the lack of records for lemon farming, kept detailed books and records relating to their trusts. The trust-related financial records included balance sheets, capital gain reports, and transaction reports byPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011