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abandoned the lemon farming activity. In fact, 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.
Such conduct is inconsistent with a predominant, principal, or
primary purpose of making a profit from the activity.
Moreover, petitioners sustained large losses from the lemon
farming activity from the start and continuing through the years
at issue. See Golanty v. Commissioner, 72 T.C. 411, 427 (1979),
affd. without published opinion 647 F.2d 170 (9th Cir. 1981);
sec. 1.183-2(b)(6), Income Tax Regs. The initial losses
contained an element of startup costs and involved factors unique
to lemon growing. Petitioners were aware that it would take 10
years before the lemon trees reached full production. The losses
continued, consistent with this forecast, for at least 9 years
after petitioners began the lemon farming activity.
The losses continued for all of the years at issue, well
beyond the startup phase of the activity. See Engdahl v.
Commissioner, supra; sec. 1.183-2(b)(6), Income Tax Regs.
Petitioners contend that these continued losses were due to
unforeseen events beyond their control, such as the wildfire and
the water shortage. See sec. 1.183-2(b)(6), Income Tax Regs. We
find petitioners’ testimony regarding the water shortage lacks
credibility. For example, the pathologist who examined
petitioners’ trees in 1997 noted that the problems with their
trees might be due to the soil staying wet for too long.
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