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Petitioner consulted with neighboring farmers since moving to the
family farm.
Petitioner did not have a written business plan for his
farming activity. Nor did petitioner maintain a cash receipts
book, a general ledger, or a separate checking account for the
farming activity. The family farm, however, is quite important
to petitioner. Petitioner intended to build the farm and make it
productive before leaving the farm to his children. To date,
petitioner has lost approximately $80,000 to $90,000 as a result
of conducting the farming activity.
Petitioners’ Income Tax Returns and the Deficiency Notice
Petitioners filed joint income tax returns for the years at
issue on Forms 1040, U.S. Individual Income Tax Return, which
petitioner himself prepared. Petitioner reported net losses on
Schedules F, Profit or Loss From Farming, of $2,352 for 1998,
$2,140 for 1999, and $4,679 for 2000. In 1998, petitioner
reported no income from the farm and expenses of $2,352. In
1999, petitioner reported $4,155 of income from the farm and
expenses of $6,295. Also in 1999, petitioner reported $7,500 of
income from the sale of timber on Schedule D, Capital Gains and
Losses. In 2000, petitioner reported $1,690 of income from the
farm and expenses of $6,369. Petitioner deducted the net losses
from the farming activity against other income reported on the
tax returns for the years at issue.
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